Apollo Shoes Inc. 100 Shoe Plaza Shoetown, ME 00001 To the Board of Directors of Apollo Shoes, Inc.: Thank you for choosing Anderson, Olds, and Watershed (AOW) to audit your company. It is an honor to present you with 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.
Three types of auditing services are provided by AOW. The first is an operational audit. Operational audits evaluate the efficiency and effectiveness of the company’s operating procedures and methods (Arens, Elder, & Beasley, 2012). The examination of a department, such as payroll, marketing, or production, takes place through this audit. It is sometimes looked upon as a consultation. The company may benefit from an operational audit by evaluating the techniques used in the different areas of the company. The second type of auditing service is a compliance audit. A compliance audit determines if the company is following the regulations set by higher authorities. It ensures the company is in compliance with requirements set by internal and external groups. 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, et al., 2012). 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. Financial statement audits are most likely to detect material misstatements.
Additionally, AOW provides assurance services to clients to improve reliability and relevance of information for decision makers. AOW has experience auditing and reviewing historical financial statements and auditing internal control over financial reporting. Our firm can review or audit the historical financial statements depending on the depth Apollo Shoes would like. The review consists of a lower level of assurance requiring less evidence. The audit is most common as it is required for publically traded companies. It results in a written report expressing the accordance of the applicable accounting standards. An audit of the historical financial statements can help to identify fraudulent activity, especially considering the need to change auditors. The audit of internal controls over financial reporting follows Section 404 of the Sarbanes-Oxley Act requiring public companies to report management’s assessment of the effectiveness of internal control (Arens, et al., 2012). It helps to identify areas of weakness and reduce the likelihood of material misstatements in the future.
A final attestation service that may benefit Apollo Shoes Inc. is the SysTrust service. This is a service provided by AOW to provide assurance to the company and third parties about the reliability of the information system generating real-time information. Since Apollo Shoes purchased a new system in July, this may be a service you are interested in to provide assurance after the change in auditors. AOW evaluates the computer system using Trust Services criteria to determine if controls over the system exist (Arens, et al., 2012). Those controls are tested to see if they are operating effectively during a specified period. As the primary auditor, my role is to provide these audit and assurance services to Apollo Shoes, Inc. It is my duty to obtain an adequate understanding of your company while planning the audit. I will coordinate and supervise a team of staff auditors. The staff auditors gather and test the evidence supporting the information in the audit. The audit manager, Darlene Wardlaw, reviews all audit work, prior to the review by a firm partner, Arnold Anderson. Mr. Anderson has the ultimate responsibility in ensuring an adequate review. A written report will complete the audit or review with AOW’s opinion of the audited information. It will show if the audited information is in accordance with accounting standards and also provides third parties with an adequate representation of Apollo Shoes, Inc.’s financial situation.
We will need your help to ensure this audit meets our standards. We will need your staff to accommodate AOW with any financial documents we may need for the audit. We know you are limited on staff time and should be able to accommodate your request for federal and state tax return preparations, but we must receive approval from the audit committee prior to performing both the audit and the tax work.
On a final note, I would once again like to thank you for choosing Anderson, Olds, and Watershed as your new auditors. I hope I have detailed our firm to your liking and given an adequate perception of our professional knowledge, standards, and the services we have to offer. If you need any additional information, please do not hesitate to ask. Sincerely,
Anastasia Kepner, CPA Auditor for Anderson, Olds, & Watershed Shoetown, ME 00001
References Arens, A. A., Elder, R. J., & Beasley, M. S. (2012). Auditing and assurance services: An integrated approach (14th ed.). New York, NY: Pearson/Prentice Hall. Retrieved from University of Phoenix Library.