BM1909

TASK PERFORMANCE
Based on the engagement evaluation considerations noted during the client acceptance evaluation, you
consider that a prospective client, Legacy Commercial Inc., should be accepted. Thus, you are satisfied that
there are no prohibitions that would prevent the firm or any member of the engagement team from
performing the audit.
Accomplish the engagement letter below by selecting the appropriate phrases in every section. Choices are
given in the table below. (25 items x 2 points)

AUDIT ENGAGEMENT LETTER

_________________ (Date)

Ms. Drexler Sanchez

VP - Finance
Legacy Commercial Inc.
413 St. James, Taytay, Rizal

Dear Ms. Sanchez:

We are confirming our engagement to audit the financial statements of Legacy Commercial, Inc. (“the
Company”) as at and for the year ended December 31, 201A.

Our audit will be made with the objective of our expressing an __________ on the financial statements of the
Company.

The Responsibilities of the ____________

We will conduct our audit in accordance with ____________________________. Those standards require that
we comply with ____________________ and plan and perform the audit to obtain ____________ assurance
about whether the financial statements are free from ___________________. An audit involves performing
procedures to obtain _________________ about the amounts and disclosures in the financial statements. The
procedures selected depend on the ___________________, including the assessment of the risks of material
misstatement of the financial statement whether due to _________or_________. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of _________________
made by ________________, 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 a/an _________________ that some material misstatements may not be detected, even though the audit
is properly planned and performed. In making our risk assessments, we consider ________________ relevant
to the Company’s preparation of the ___________________ in order to design the __________________ that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
____________________________. However, we will communicate with you in writing concerning any
significant deficiencies relevant to the audit of the financial statements that we have identified during the
audit.

06 Task Performance 1 *Property of STI

Page 1 of 3
 BM1909

The Responsibilities of the __________

Our audit will be conducted on the basis that management acknowledges and understands that they have the
responsibility:

a) For the preparation and fair presentation of the financial statements in accordance with
_______________
b) For such internal control as management determines is necessary to enable the preparation of
financial statements that are free from material misstatement whether due to ______ or _______;
and
c) To provide us with:
a. Access to all information of which management is aware that is relevant to the preparation of
the financial statements such as records, documentation, and other matters;
b. Additional information that we may request from management for audit; and
c. Unrestricted access to persons within the Company from whom we determine it necessary to
obtain audit evidence.

As part of our audit process, we will request from management a written confirmation concerning
representations made to us in connection with the audit.

We look forward to full cooperation from your staff during our audit.

____________

We will agree with you on a timetable that will enable you to meet statutory obligations in relation to the filing
of financial statements with Bureau of Internal Revenue, Securities and Exchange Commission, and any other
reportorial deadline that you will bring to our attention. Any such timetable will, however, be based on the
assumption that we will receive the appropriate cooperation and assistance from you.

_____________

We estimate that the fees for our services will be P1,000,000.

_____________

Our report will be made solely to the Company, in accordance with __________________________. Our audit
work will be undertaken so that we might report on the Company’s audited financial statements and for no
other purpose. In those circumstances, to the fullest extent permitted by law, we will not accept or assume
responsibility to anyone other than the Company for our audit work for the audit report and for the opinions
we form.

Acknowledgment

Please confirm your agreement to the terms of our appointment by countersigning and returning us the
enclosed copy of this letter.

We are pleased to have this opportunity to be of service to you and assure you that this engagement will be
given our close attention.

06 Task Performance 1 *Property of STI

Page 2 of 3
 BM1909

Very truly yours,

_______________
YOUR NAME
Partner

Choices:

Note: The following choices may be used more than once.

Philippine Financial Reporting Reasonable Audit evidence Material misstatement

Standards (PFRS)
Philippine Accounting Standards (PAS) Error Fees Client’s available records
Philippine Standards on Auditing (PSA) Audit Auditor Limitation of Liability
procedures
Absolute Assurance Auditor’s judgment Avoidable risk
Negative Timetable Management Unavoidable risk
Internal control Mission and Board of Directors Audit Committee
vision
Effectiveness of internal control Quality policy Efficiency and Policies and procedures
effectiveness of
policies
Ethical requirements Financial Fraud Accounting estimates
statements

06 Task Performance 1 *Property of STI

Page 3 of 3