DEF Auditing Firm, Inc.

December 8, 2015

Mr. Juan Dela Cruz
President
ABC Company
123 Samson Rd., Caloocan City

Dear Mr. Dela Cruz:

I am pleased to confirm my understanding of the services I am to provide the ABC Company for fiscal year ended December 31, 2015. I will audit the financial statements of the governmental activities, and each major fund, and the aggregate remaining fund information, which collectively comprise the entity’s basic financial statements, of the ABC Company as of and for the year ended December 31, 2015.

Audit Objective
The objective of this audit is the expression of opinions as to whether your basic financial statements are fairly presented, in all material aspects, in conformity with the generally accepted accounting principles and to report on the fairness of the additional information referred to in the first paragraph when considered in relation to the basic financial statements taken as a whole.

Responsibilities of the Auditor
We have a statutory responsibility to report to the members whether in our opinion the financial statements give a true and fair view of the state of the company’s affairs and of the profit and loss for the year and whether they comply with the government regulations in reporting.
In arriving at our opinion, we are required to consider the following matters, and to report on any in respect of which we are not satisfied: (a) whether proper accounting records have been kept by the company; (b) whether the company’s balance sheet and profit and loss account are in agreement with the accounting records and returns; (c) whether we have obtained all the information and explanations which we think necessary for the purpose of our audit; (d) whether the information in the directors’ reports is consistent with that in the audited financial statements; and (e) whether there is existed at the balance sheet date a financial situation which would require the convening of an extraordinary general meeting of the company.

We have a responsibility to report if the financial statements do not comply in any material aspect with applicable accounting standards unless a departure is considered justified by considering: (a) whether the departure is required in order for the financial statements to give a true and fair view; and (b) whether adequate disclosure has been made concerning the departure.

We will express an unqualified opinion when the financial statements give a true and fair view in accordance with the financial reporting framework. Any modification to this unqualified audit opinion will be expressed in our auditor’s report and in the audit findings letter.

Responsibilities of the Management
Our audit will be conducted on the basis that, management and where appropriate those charged with governance, acknowledge and understand that they have responsibility: (a) for maintaining proper accounting records and preparing financial statements which give a true and fair view and comply with the appropriate accounting standards; (b) for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards, and for preparing them such that those financial statements give a true and fair view of the state of affairs of the company as at the end of its financial year and of its profit or loss for that financial year; (c) for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error; and (d) to provide us with: a. access to company accounting records and 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 the purpose of the audit; and c. unrestricted access to persons within the entity from whom we determine it necessary to obtain audit evidences.

As part of our audit process, we will request from [management and, where appropriate, those charged with governance], written confirmation concerning representations made to us in connection with the audit. You are also required to inform us of any material event occurring which may affect the financial statements.

Identification of the Framework
We will express an audit opinion when the financial statements give a true and fair view in accordance with the financial reporting framework.

Scope of the Audit
Our audit will be conducted in accordance with the Philippine Standards on Auditing issued by the Auditing Practices Board and will have regard to relevant Auditing Guidelines, regulations and recommendations issued by the auditing practices board and other professional bodies to the extent relevant.. Furthermore, it will be conducted in such a manner as we consider necessary to fulfil our responsibilities and will include such tests of transactions and of the existence, ownership and valuation of assets and liabilities as we consider necessary.

We shall obtain an understanding of the accounting and internal control system in order to assess its adequacy as a basis for the preparation of the financial statements and to establish whether proper accounting records have been maintained. We shall expect to obtain such relevant and reliable evidence as we consider sufficient to enable us to draw reasonable conclusions therefrom.

Form of any Report or Other Communication needed for the Engagement
As part of our normal audit procedures, we may request you to provide written confirmation of oral representations that we have received from you during the course of the audit for example those which are significantly dependent on judgement.

In order to assist us with the examination of your financial statements, we shall request sight of all documents or statements, including the directors' report, which are due to be issued with the financial statements. We are also entitled to attend all General meetings of the company and to receive notice of all such meetings.

Statement of Audit Limitation due to Risk
This document is for information purposes only and does not give, or purport to give, professional advice. It should, accordingly, not be relied upon as such. No party should act or refrain from acting on the basis of any material contained in this document without seeking appropriate professional advice.

While every care has been taken by the Philippine Institute of Certified Public Accountants in the preparation of this document, we do not guarantee the accuracy or veracity of any information or opinion, or the appropriateness, suitability or applicability of any practice or procedure contained therein. To the fullest extent permitted by applicable law, the Philippine Institute of Certified Public Accountants shall not therefore be liable for any damage or loss, including but not limited to, indirect or consequential loss or damage, loss of data, income, profit or opportunity and claims of third parties, whether arising from the negligence, or otherwise of the Philippine Institute of Certified Public Accountants, its employees, servants or agents, or of the authors who contributed to the text.

Yours truly,

_____________________
Mr. Arcee C. Dayego
DEF Auditing Firm, Inc.

We agree to the terms of this letter.
Signed for and on behalf of

_____________________
Mr. Juan Dela Cruz
President, ABC Company