Part 1: A Draft Letter for John Spot
Dear Client,
Spot This Ltd. is required to have an auditor in accordance to the primary principle of financial reporting to provide the information to the external users who have a need for an entity’s financial statements but are unable to demand them. There are three indicators in which the company is qualified. First is the public accountability in which the entity receives the money directly from the public, second is the separation of ownership and management, and third is the economic and social significance that will create an impact on the national economy; therefore, more reporting is required. In addition, all the companies and issues (which entities are the issue securities to public) are obliged to complete financial statements in accordance with the requirement of the Financial Reporting Act of 1993.
According to Companies Act, with the virtue of section 10A of the Financial Reporting Act 1993, the directors of a company are not required to comply with section 10 of that Act in respect of an accounting period. The auditor of the company is not required to audit financial statements of the company for that period. In reference of the definition of the “exempt company”, the companies should satisfy that the requirements apply at the most recent balance date of the company’s accounting records. Also the value of the total value of all the assets (including the intangible assets) reported in the company’s statement of financial position or balance sheet at that time. And lastly, the turnover of the total annualized gross operating revenue is based on the amount reported in the company’s statement of overall financial performance.
Concerning the expectation of the auditors on the accounting records and financial statements is to make reports that will state under the Financial Reporting Act 1993. Auditors has an automatic reappointment, as of Companies Act sec. 200, the auditor is not qualified for appointment; or the company passes a resolution at the meeting appointing another person to replace him/her as auditor; or the company passes under the section 196(2) of the Companies Act that no auditor be appointed; and lastly, the auditors is not automatically reappointed if the person who it is propose to replace him or her dies, incapable or disqualified from appointment.
Thank you,
Auditor
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