Johnson Limited is an unlisted company. It has recently become your new audit client. You are the audit manager of Wong & Co. Your firm is engaged to perform the audit of its financial statements for the year ended 31 December 2017. Based on the discussion with the CFO, your audit engagement team has prepared a draft engagement letter for your review: [Date] To the Board of Directors of Johnson Limited Obiective of services You have requested that we audit the financial statements of Johnson Limited. We are pleased to confirm our acceptance and our understanding of this audit engagement by means of this letter. Our audit will be conducted with the objective of our expressing an opinion on the financial statements Scope of audit The audit will be conducted in accordance with Hong Kong Standards on Auditing ("HKSAs") issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA") Those standards require that the auditor complies with ethical requirements and plans and performs the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements Because of the inherent limitations of an audit, together with the inherent limitations of internal control, there is an unavoidable risk that some material misstatements may not be detected, even though the audit is properly planned and performed in accordance witlh HKSAs In making risk assessments, we consider internal control relevant to your company's preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of your company's internal control