You have requested that we prepare the financial statements of [Company Name] (the “Company”), perform a compilation engagement with respect to those financial statements. We are pleased to confirm our acceptance and understanding of the services we are to provide by means of this letter.
The objectives of our engagement are to:
1) prepare the Company’s financial statements, which comprise the balance sheet as of December 31, 2017, and the related statements of income and members’ equity and cash flows for the year ended, and the related notes to the financial statements, in accordance with accounting principles generally accepted in the United States of America (“GAAP”) based on information provided by management and obtain management’s approval of the financial statements, accompanying notes, and
2) compile the financial statements of the Company by applying accounting and financial reporting expertise to assist management in the presentation of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements for them to be in accordance with GAAP.
We will conduct our engagement in accordance with Statements on Standards for Accounting and Review Services (“SSARS”) promulgated by the Accounting and Review Services Committee of the American Institute of Certified Public Accountants (“AICPA”) and comply with applicable professional standards, including the AICPA’s Code of Professional Conduct, and its ethical principles of integrity, objectivity, professional competence, and due care, when performing the bookkeeping services, preparing the financial statements, and performing our engagement. We are not required to, and will not, verify the accuracy or completeness of the information management will provide to us related to this engagement or otherwise gather evidence for the purpose of expressing an opinion or a conclusion. Accordingly, we will not express an opinion or a conclusion nor provide any assurance on the financial statements. Our engagement cannot be relied upon to identify or disclose any financial statement
misstatements, including those caused by fraud or error, or to identify or disclose any wrongdoing within the entity or noncompliance with laws and regulations. However, we will inform the appropriate level of management of any material errors and any evidence or information that comes to our attention during the performance of our procedures that fraud may have occurred. In addition, we will inform the appropriate level of management of any evidence or information that comes to our attention during the performance of our
compilation procedures regarding any wrongdoing within the entity or noncompliance with laws and regulations that may have occurred, unless they are clearly inconsequential. Our services are not designed to provide assurance on internal controls or to identify deficiencies in the design or operation of internal control. Therefore, our engagement should not be relied upon to identify deficiencies in the Company’s internal controls. Accordingly, we have no responsibility to identify and communicate deficiencies or material weaknesses in internal controls as part of this engagement. [Partner Names] will serve as the compilation engagement partner and is responsible for supervising the compilation engagement and signing our accountants’ compilation report or authorizing another individual to sign it.
We intend to issue a written accountants’ compilation report that will state that we did not audit or review the financial statements and that, accordingly, we do not express an opinion, a conclusion, nor provide any assurance on them. If, for any reason, we are unable to complete the compilation of the Company’s financial statements, we will not issue a report on such statements relating to this engagement. Regarding the electronic dissemination of compiled financial statements, including financial statements published electronically on a public website, management understands that electronic sites are a means to distribute information and, therefore, we are not required to read the information contained in these sites or to consider the consistency of other information in the electronic site with the original document.
The engagement to be performed will be conducted on the basis that management acknowledges and understands that our role will be to prepare financial statements, accompanying notes in accordance with GAAP and assist management in the presentation of the financial statements in accordance with GAAP. Management has the following overall responsibilities that are fundamental to our undertaking the engagement in accordance with SSARS and other professional standards:
1) For the selection and application of sound and appropriate financial principles. We may advise management about appropriate accounting principles and their application, but the responsibility for the financial statements remains with management.
2) For the preparation and the fair presentation of financial statements in conformity with GAAP and the inclusion of all informative disclosures that are appropriate for GAAP.
3) For the accuracy and completeness of the records, documents, explanations, and other information provided to us during the engagement, including significant judgments.
4) For the proper recording of transactions in the Company’s accounts and for the completeness and substantial accuracy of the financial records.
5) For the design, implementation, and maintenance of adequate and effective internal control, including monitoring ongoing activities relevant to the preparation and fair presentation of the financial statements.
6) For the prevention and detection of fraud.
7) For safeguarding assets, authorizing transactions and retaining supporting
documentation for those transactions.
8) For identifying and ensuring that the Company complies with the laws and regulations applicable to its activities.
9) For providing us with—
a) access to all information of which management is aware relevant to the preparation and fair presentation of the financial statements and supplemental information, such as records, documentation, and other matters.
b) additional information that we may request from management related to our engagement.
c) unrestricted access to persons within the Company of whom we determine it necessary to make inquiries.
10) To review and approve any standard, adjusting, or correcting journal entries to the Company’s financial statements that we may propose and understand the nature of any proposed entries and the impact they have on the financial statements.
11) For adjusting the financial statements to correct material misstatements.
12) For disclosing the date through which subsequent events have been evaluated and whether that date is the date the financial statements were issued or were available to be issued. Management agrees that the date of subsequent events consideration to be disclosed in the notes to the financial statements will not be earlier than the date of management’s representation letter.
13) For providing us with a letter at the conclusion of our compilation engagement that confirms certain representations about the financial statements and related matters made during the engagement.
14) For restricting the distribution of our accountants’ compilation report to the internal use of the Company’s management and current lender, and, accordingly, refrain from distributing our accountants’ compilation report to any other outside parties to obtain credit or for any other purpose without our prior express written consent.
15) For including our accountants’ compilation report in any document containing financial statements that indicate that we have performed a compilation engagement on such financial statements and, prior to the inclusion of the report, to ask our permission to do so.
16) For notifying us in advance of its intent to reproduce our accountants’ compilation report for any reason, in whole or in part, and to give us the opportunity to review any printed material containing our report before its issuance. Such notification does not constitute an acknowledgement on our part of any third party’s intent to rely on the financial statements. To ensure that our independence is not impaired under the AICPA’s Code of Professional Conduct, management agrees to designate an individual with suitable skills, knowledge, and experience to oversee our preparation of the Company’s financial statements, accompanying notes. You are responsible for evaluating the adequacy and results of our services performed and accepting responsibility for such services. We, in our sole professional judgment, reserve the right to refuse to perform any procedure or take any action that could be construed as assuming management responsibilities. Our engagement does not absolve management or the Board of Directors of any of their responsibilities, including those described in this letter.
Engagement Administration, Fees, Other
We intend to commence our services upon receipt of your retainer payment. Assuming no delays or inefficiencies beyond our control, we intend to complete our compilation and issue our report no later than [Date]. Our engagement will be complete upon delivery of our accountants’ compilation report, or notification pursuant to the terms of this letter.
Our professional fees for the services described above, excluding business expenses (e.g. travel, postage, etc.), will be between [PRICE RANGE]. We base our fees on time required at our standard hourly rates for the type of services and personnel assigned to the engagements, plus out-of-pocket costs. Our standard hourly rates currently range from [PRICE RANGE] for staff time to [PRICE RANGE] for partner time. We also consider the difficulty and size of the engagements, the degree of skill required, time limitations imposed on us by others, the experience and ability of the personnel assigned, the nature of the engagement, the level of cooperation by the Company’s staff, their agents and affiliates, and the value of the services to the Company.
Our fees are based on all the following assumptions and expectations:
- Significant anticipated cooperation from the Company’s personnel to coordinate, locate, gather and provide all requested information related to our engagement,
- Management, their agents or designees will timely and accurately prepare and supply us with all necessary account reconciliations and supporting schedules,
- A minimal level of adjustments,
- All accounts will be reconciled, and all transactions recorded timely and in the proper period prior to the commencement of our procedures,
- No special purpose entities whose financial activities are required by GAAP to be combined or consolidated with those of the Company’s,
- Timely (generally within two weeks of receipt) review and approval by management of the draft financial statements,
- Timely receipt (generally within two weeks of request) of management’s signed representation letter, and
- No delays, inefficiencies, or unexpected accounting, reporting or other circumstances during our engagement caused by events beyond our control.
We will schedule our engagement based in part on deadlines, working conditions, and the availability of your key personnel. If, for whatever reason, any of the above assumptions and expectations are not realized or such cooperation is not received in a timely manner such that it impedes our services, it may substantially increase our work related to this engagement, resulting in an increase in professional fees over the amounts quoted. In addition, we may suspend our services or withdraw from the engagement. If significant additional time is necessary, it will be billed at our standard hourly rates noted above. However, before the Company incurs any additional costs, we will discuss the situation with management in advance.
In accordance with our firm policy, prior to the commencement of our services we will require a retainer in the amount of [PRICE] which will be applied to the final billing for our services. Invoices for our fees will be rendered periodically as work progresses and are payable on presentation. In accordance with our firm policies, work may be suspended if the Company’s account becomes significantly overdue and will not be resumed until its account is paid in full. If we elect to terminate our services for nonpayment or any other reason, we will deem our engagement to have been completed upon written notification of termination, even if we have not issued our accountants’ compilation report. The Company will be obligated to compensate us for all time expended and to reimburse us for all outof- pocket expenditures through the date of termination.
During our engagement, we may accumulate original payroll, personnel, accounting and other records and will return these records promptly upon completion of our engagement, if not sooner. The documentation for this engagement is the property of SAM Technology, LLC, and constitutes confidential information. However, if requested, we, at our discretion, may provide copies of our documentation to the Company or its representatives in exchange for reasonable compensation for our time and associated expenses, if any. We normally retain our documentation related to the financial statement compilation for a period of at least seven years from the date of our accountants’ report. In addition, we may be requested to make certain documentation available to certain governmental or regulatory agencies pursuant to authority given to it by law or regulation. If requested, access to such documentation will be provided under the supervision of SAM Technology, LLC, personnel. Furthermore, upon request, we may provide copies of selected documentation to certain governmental or regulatory agencies that may intend, or decide, to distribute the copies or information contained therein to others, including other such agencies.
Management or their representatives or agents may request that we perform additional services, including, but not limited to, bookkeeping services, tax planning services, or other business consulting services. In performing these services, certain financial information may be provided to us. We will rely on the sufficiency, accuracy, and reliability of all information provided by management or their agents or representatives. Our services will not constitute an audit, review, or compilation of the information provided and, accordingly, we will not express a conclusion or provide any other form of assurance on the completeness or accuracy of the information. In the performance of our services, we will not perform management functions or make management decisions for the Company. However, we may provide advice, research materials and recommendations to assist management in performing its functions and making decisions. Unless specified in a separate engagement letter, any additional services we perform will continue to be governed by the terms of this engagement letter and will be billed to the Company at our standard hourly rates.
This engagement letter, together with the General Business Terms attached hereto, constitute the entire agreement between the Company (“Client”) and SAM Technology, LLC, with respect to this engagement. This engagement letter supersedes all other oral and written representations, understandings or agreements relating to this engagement, and may not be amended except by the mutual written agreement of the Client and BLP. We appreciate the opportunity to be of service to the Company.