Running head: Auditing Introduction Letter

Auditing Introduction Letter

Jennifer Plett
ACC/546
November 17, 2014
Kelley Oleary

Running head: Auditing Introduction Letter

Larry Lancaster
Chairman of Board of Directors
President and CEO
Apollo Shoes Inc.
100 Shoe Plaza
Shoetown, ME 00001
Dear Mr. Lancaster,
Thank you for choosing Anderson, Olds, and Watershed (AOW) to audit your company. This letter is an
introduction to our auditing and assurance services. It is the firm's belief for our clients to understand
our qualifications and the benefits to the services we provide before providing the services. I want to
explain my role in providing the assurance services available, and describe the requirements for meeting
the standards of our services I would like to provide you.
Auditing and Assurance Services
Auditing is defined as "the accumulation and evaluation of evidence about information to determine
and report on the degree of correspondence between the information and established criteria" (Arens,
Elder, & Beasley, 2014, Chapter 1). Audits are also known as attestation services, which is one category
of our firm's assurance services. Our firm offers three different types of audit services: operational
audits, financial statement audits, and compliance audits.
Operational audits provide evaluations on the efficiency and effectiveness of your operating procedures
and methods in different departments to include accounting, payroll, or the structure of your
organization (Arens, Elder, & Beasley, 2014, Chapter 1). The company may benefit from an operational
audit by evaluating the techniques used in the different areas of the company. Operational audits can
help improve the efficiency of a company with provided recommendations by our office. The
recommendations can result in a decrease to expenses or losses, improve productivity, and possibly lead
to an increase in profit.
Compliance audits review whether or not the rules, procedures, and regulations set forth by either the
company or some other form of authority are followed properly. Compliance audits are beneficial
because our attestation will indicate if employees and the organization are following certain rules,
regulations, and standards set by both internal and external groups. If the protocol is not followed, our
office will be able to determine where the issue is occurring resulting in the possibility of avoiding
penalties and fees by any external organizations.
The third type of auditing service is a financial statement audit. This type of audit examines if the
financial statements are in agreement with accounting standards or a basis of accounting appropriate
for the company (Arens, Elder, & Beasley, 2014, Chapter 1). Financial statement audits are likely to
detect most errors and material misstatements. As a publicly traded company, the Securities and
Exchange Commission (SEC) requires Apollo Shoes Inc. to submit audited financial statements as part of
its annual 10-K filing. It can also serve to provide shareholders and external stakeholders with assurance
that your financial statements are fairly presented in accordance with generally accepted accounting

Running head: Auditing Introduction Letter

principles (GAAP). AOW's tax specialist will prepare Apollo Shoes' requested services for tax returns for
the State Franchise Tax Board and the Federal Tax return along with filing the 10-K requirements.

In addition to audits, AOW provides assurance services to clients to improve reliability and relevance of
information for decision makers. AOW has experience in conducting audits and reviews of historical
financial statements. A review of historical financial statements is similar to an audit but requires less
evidence and results in a lower level of assurance of financial statements compared to a high level for
audits (Arens, Elder, & Beasley, 2014, Chapter 1).
Another assurance we offer that could benefit Apollo Shoes is Information Systems auditing. Not only
will our firm make sure your computer system is up to date, we will also perform an audit on the
reliability and security of the system. In addition, an internal control audit will help to assess risks of any
material misstatements.
Auditor's Role in the assurance services
"In order for an opinion to be expressed on the financial statements, the auditor must obtain reasonable
assurance about whether the financial statements as a whole are free from material misstatements,
whether due to fraud or error," (Arens, Elder, & Beasley, 2014, Chapter 2). Reasonable assurance is
obtained by performing several steps and responsibilities. Before proceeding an audit, a background of
the company and knowledge of the industry should be understood. First step is adequately planning an
audit and supervising any assistants. Next, determine and apply materiality levels. This is where possible
risks of material misstatements can be detected. "A misstatement is considered material if knowledge of
material misstatements will affect the decision of a reasonable user of the financial statements," (Arens,
Elder, & Beasley, 2014, Chapter 1). Then the auditor will assess any risks that were found in the financial
statements to determine if any material misstatements exist. This is where understanding a client's
business, and industry is useful. The internal control audit is also useful in assessing risks. If the auditor is
convinced that the client has "adequate internal controls for providing reliable data, the amount of audit
evidence to be accumulated can be significantly less than when controls are not adequate," (Arens,
Elder, & Beasley, 2014, Chapter 2). Finally, sufficient appropriate evidence is obtained from the audit
about the existence of material misstatements through designing and implementing appropriate
responses to the assessed risks.
Based on the evaluation of the audit evidence obtained and the auditor's findings, opinions are
expressed in a written report about whether the financial statements are presented fairly in accordance
with the client's financial reporting framework. "If an opinion cannot be expressed, the auditor's report
should state that conclusion," (Arens, Elder, & Beasley, 2014, Chapter 2).
Requirements
The following requirements are needed in order to perform up to standards for the services we are
offering:
Copy of last year's 10-K
Apollo Shoe's organizational chart
End of the year Trial Balance
Requested transactions for samples that is the base work of the audit

Running head: Auditing Introduction Letter

Conclusion
In conducting a successful audit and reasonable assurance for stakeholders, CPAs are required to uphold
the most ethical principles. Core ethical values include honesty, integrity, respect reliability, fairness,
responsibility, citizenship, and caring. Personnel of our company will strive to use all ethical principles
during and after your audit, in hopes that Apollo Shoes will find AOW all of what is expected.

Running head: Auditing Introduction Letter

References:

Arens, A. A., Elder, R. J., & Beasley, M. S. (2014). Auditing and Assurance Services: An Integrated
Approach (15th ed.). Retrieved from The University of Phoenix eBook Collection database