Below is the engagement letter drafted by a CPA firm regarding an audit of a first-year client that has not been audited before.

Required

1. Discuss the purpose of an engagement letter

2. Discuss what should be in the letter.

3. Identify 10 errors of commission or omission and explain your answer.

Dewey Cheatem & Howe LLC

Certified Public Accountants

1234 Lackanohow Blvd.

Lake Muddy, Florida 33461

November 20, 2017

Dr. Ken Hurt, President

Medicinal Orange Products

5 Grove Road

Lake Woebegone, Florida 34155

Dear Dr. Hurt:

You have requested that we audit the financial statements of Medicinal Orange Products for the year ended December 31, 2017. We are pleased to confirm our acceptance of this engagement and will provide you an unmodified report by January 25, 2018.

We will conduct our audit in accordance with auditing standards prescribed in generally accepted accounting standards (GAAP) in the United States. We expect to finish the audit in 25 hours and the fee will be $10,000 payable with the acceptance of this letter. If for some reason we both agree we cannot provide an unmodified report the fee for a qualified report will be $6,000 an adverse opinion fee will be $4,000 and a disclaimer will be $2,500. An appropriate refund of the portion of your remittance of the $10,000 will be made, if necessary.

We will provide you with an internal control questionnaire and ask that you complete it and send it to our office at the above address. You acknowledge your responsibilities and we will do a professional job in accordance with our procedure manual.

We understand that all questions regarding your operations must go through you and not your staff. You will send copies of all documents we request to our office. We plan to mail confirmations to your bank and you will provide us with a list of accounts receivable customers that we are permitted to contact.

You have very large inventory balances and understand that you usually estimate year-end inventory. If you choose to take an inventory count, please let us know when and we will stop by to see it.

At the end of the audit we will ask you and my daughter, Mrs. Lucy Books, the CFO, to sign a letter stating that everything is OK and we will write your attorney, Ms. Sue Yu, to see if she has any comments.

Since you are also the chairman of the board we will address the report to you personally.

Please sign and return a copy of this letter

1. Cheatem, CPA

Dewey Cheatem & Howe

Acknowledgment and agreed upon on behalf of Medicinal Orange Products

__________________________________________

Ken Hurt, President

Date _____________