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Date: Thu, 25 OCT 2007 00:42:35 +0000 From: "Darlene Wardlaw" <XXXXX@XXXXXX.XXX> Subject: Upcoming Apollo Shoes EngagementAttachment: <<AudComMins-101807.doc>>
Well, first let me congratulate you on your recent promotion. Although we have not worked on an engagement together before, I have heard many good things about you. I look forward to working with you on the new Apollo Shoes engagement.
I understand that this is your first engagement to in-charge. XXXXX XXXXX (aka "Uncle Arnie") will be the engagement partner; he is pretty sharp so you'll have to stay on your toes. As engagement manager, I'll try to help out as much as I can. Understand, however, that I am managing four other busy season engagements, so my interaction time with you will be limited. For now, I want you familiarize yourself with Apollo Shoes and help me out by doing the following:
Finally, since most of our interaction will be by e-mail, please forgive me if I give you too much detail. Since we haven't worked together before, I'd rather give you too much than too little until we get used to working together.
Minutes of the Audit Committee, Apollo Shoes
October 18, 2007
Present at Meeting: XXXXX XXXXX, CPA (partner in charge of the audit); Darlene Wardlaw, CPA (engagement manager); Eric Unum (Apollo 's vice president of finance); Mary Costain (Apollo 's treasurer); Samuel Carboy (Apollo 's controller); and Karina Ramirez (Apollo 's director of internal audit). The three members of the audit committee of the board and the corporate secretary also were present, but they did not enter into the conversation.
Mr. Unum (VP finance): Well, I want to welcome the auditing firm of Anderson, Olds, and Watershed, CPAs to what we call the "Apollo Shoes Experience." After our old auditors, Smith & Smith, CPAs, unexpectedly withdrew from the engagement, we were very happy to have a firm of your quality to come aboard.
Mr. Anderson (partner on the audit): Well, we are always looking for high quality clients. By the way, why did your previous auditors resign?
Mr. Unum (VP finance): I'd rather not talk about it. Arnold, will Darlene be in charge?
Mr. Anderson (partner on the audit): Yes, and she will be assisted by several of our best staff, including a tax specialist and an information systems auditor. We need to keep up to date on your computer systems. Back to your previous auditors, with your permission, we would like to contact them.
Mr. Unum (VP finance): Well, we'd rather you didn't. There may be some litigation since they withdrew from the engagement with so little notice. Is it necessary for you to speak with them to accept the engagement?
Mr. Anderson (partner on the audit): No, not really, but it does raise some concerns for our firm.
Ms. Costain (treasurer): In the past, we have never had any unpleasant discoveries of embezzlement or theft, but we always want to be vigilant. Will you plan enough in-depth auditing to give us assurances about errors and frauds in the accounts?
Ms. Wardlaw (manager on the audit): We will follow audit standards and base our audit work on samples of transactions. We plan the work to look for major errors and frauds in the accounts, but cleverly hidden schemes might not be discovered. According to the Sarbanes-Oxley Act of 2002, we will need to test the effectiveness of Apollo's internal controls, as well as provide you the usual separate management letter on related findings.
Ms. Ramirez (internal auditor): Darlene, I agree, it's hard to uncover clever schemes. While I am new to Apollo, none of the projects that I have undertaken this year shows anything amiss, other than normal human error types or mistakes.
Ms. Costain (treasurer): This year, we want to add some work to the audit. I am short on staff time and need to have you prepare the state franchise tax return as well as the federal tax returns.
Ms. Wardlaw (manager on the audit): Our tax staffperson can do the state and federal returns, and I will have them reviewed by Maria Olds, our tax partner. In order to perform the tax work, Sarbanes-Oxley requires that we get prior approval from the audit committee to perform both the tax work as well as the audit.
Mr. Anderson (partner on the audit): I assume you also want us to review the 10-K filing material?
Mr. Unum (VP finance): Yes. Will you need any staff help from us?
Ms. Ramirez (internal auditor): Last year, Apollo was able to save on audit fees when my staff prepared a stack of schedules and analyses that our previous auditors needed.
Mr. Wardlaw (manager on the audit): Yes, Karina, I will give you a list of schedules for various accounts. I will appreciate your having them ready when we start fieldwork in mid January.
Mr. Carboy (controller): Speaking of being ready, we will be able to give you a trial balance the day after December 31.
Mr. Unum (VP finance): How much is this going to cost us?
Mr. Anderson (partner on the audit): It is difficult to give you a fixed fee deal, but my estimate, considering the additional work, is $750,000. Darlene will let you know immediately if problems arise to cause the work to be more extensive.
Mr. Unum (VP finance): Thank you. This has been a productive meeting of the minds. We look forward to your getting started next month.
Meeting ended 5:30 p.m. /s/ Jeff Chesnut, Secretary
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