Chairman, President, and CEO
Apollo Shoes Inc.
100 Shoe Plaza
Shoetown, ME 00001
Dear Mr. Lancaster:
Thank you for your interest in our services. Here at Anderson, Olds, and Watershed CPAs, LLC, we value your business and strive to meet all of your expectations. Our firm offers various types of auditing services, including operational, compliance, and financial audits, as well as several attestation services, including reviews and audits of historical financial documents and audits of internal control over financial reporting. The purpose of this letter is to inform you of the different auditing and assurance services offered by our firm, the benefit each of ...view middle of the document...
The accountant expresses an opinion via written report regarding the statements’ fairness and compliance with applicable accounting standards. The difference between the two lies within the amount of evidence required by the accountant to arrive at an opinion. A historical audit requires much more testing and provides a higher level of assurance. Less testing and less evidence means less time spent on the task, resulting in lower fees associated with the review service. According to Arens et al., a historical financial statements audit is the most common assurance service provided by CPA firms. However, “a review is often adequate to meet financial statement users’ needs.” Either service provides valuable information to the financial statement users.
An audit of internal control over financial reporting is an attestation service. The CPA attests to management’s assurances on the development and implementation of internal controls, as required by Section 404 of the Sarbanes-Oxley Act. The auditor also must attest to the internal control’s effectiveness. The auditor performs the audit of internal control over financial reporting in combination with the financial statements audit.
Additionally, our firm offers three different types of audits. The first type is the operational audit. According to Arens et al. (2012), an operational audit evaluates the organization’s operating procedures and methods for efficiency and effectiveness. Upon completion, the auditor provides recommendations for improving operations to the company’s management. An operational audit covers more than just accounting. The auditor may evaluate marketing, computer operations, production methods, and organizational structure. The auditor may evaluate any area in which he or she is qualified.
The second type of audit is the compliance audit. Taken from page 14 of Auditing and assurance services: An integrated approach (14th ed.), written by Arens et al., “A compliance audit is conducted to determine whether the auditee is following specific procedures, rules, or regulations set by some higher authority.” This may include examining accounting procedures to determine compliance of accounting personnel with procedures set forth by the company controller or reviewing wages to verify compliance with wage laws. Both the operational and compliance audits are meant for management use and not normally provided to external users. Many consider operational and compliance audits a consulting service and not an audit.
A financial statement audit verifies that the reported information conforms to regulations. Normally, the regulations used are U.S. or international accounting standards, such as GAAP, but auditors may conduct audits on statements prepared using cash basis, tax basis, or another basis of accounting depending on the organization. As a publicly traded company, the Securities and Exchange Commission (SEC) requires Apollo Shoes, Inc. to file annual audited financial...