the CPA firm of test and check has been appointed auditors for XYZ Corporation by the company's audit committee. the engagement is limited to make an audit of the company's financial statements. the audit fee is to be at the firm's regular per diem raves plus travel costs. to confirm the arrangements, test and check sends the lowing engagement letter :

March 10,20xx

Mr. D. R. Rand, Controller

XYZ Corporation

Maintown, ME.03491

Dear Mr. Rand:

this will confirm our understanding of the arrangements for our examination of the financial statements of XYZ Corporation for the year ending December 31, 20XX.

we will examine the Company's balance sheet at December 31, 20XX, and the related statements of income, retained earnings, and cash flows for the year then ended, for the purpose of auditing them. our audit will be in accordance with generally accepted auditing standards, which require that we plan and perform the audit to assure that the financial statements are correct.

our audit will include examining, on a test basis, evidence supporting the financial statements. we will also assess the accounting methods used and significant estimates made by management.

because of the characteristics of irregularities, our audit cannot detect all material irregularities. we will, of course, report to you anything that appears to us during our audit that looks suspicious.

our fee for this audit will be on a cost-plus basis, including travel costs. invoices will be rendered every two weeks and are payable on presentation.

we are pleased to have this opportunity to serve you. if this letter correctly expresses your understanding, please sign the enclosed copy and return it to us.

very truly yours,

test and check, CPAs

M.E. test

partner

approved :

By :

Date :

required :

List the deficiencies in the engagement letter. for each deficiency, indicate the proper wording. use the following format for your answers

deficiency proper wording