Audit of XYZ for the Year Ended DAY MONTH YEAR
Appendix 21
Dear ABC
Audit of XYZ for the year ended DAY MONTH YEAR
Thepurposeofthisreportistosetoutcertainmattersthatcametoourattentionduringthecourseof theinterimauditofthefinancialstatementsofXYZfortheyearended31December.
Ourobjectiveistouseourknowledgeofthebusinessgainedduringourroutineauditworktomake usefulcommentsandsuggestionsforyoutoconsider.However,youwillappreciatethatourroutine auditworkisdesignedtoenableustoformanopiniononthefinancialstatementsofthebusinessand itshouldnotbereliedupontodiscloseallirregularitiesthatmayexistortodiscloseerrorsthatarenot materialinrelationtothefinancialstatements.
Our report is designed to include useful recommendations that may help improve performance andavoidweaknessesthatcouldleadtomateriallossormisstatement.Itisyourobligationtotake theactionsneededtoremedythoseweaknessesandshouldyoufailtodosoweshallnotbeheld responsibleiflossormisstatementoccursasaresult.
Thereportisprovidedonthebasisthatitisfortheinformationofdirectorsandmanagementofthe business;thatitwillnotbequotedorreferredto,inwholeorinpart,withoutourpriorwrittenconsent; andthatwewillacceptnoresponsibilitytoanythirdpartyinrelationtoit.
Thisreportissetoutinthreesections.Thefirstsectionaddressesourobservationsfromthisyear’s auditandourrecommendationsineacharea.Thesemattershavebeendiscussedwithmanagement and their response is included as appropriate.The second section is a summary of the matters previously raised in management reports that have not yet been implemented/resolved and their currentstatus.Thethirdsectionisasummaryofmatterspreviouslyraisedinmanagementreportsthat havebeenaddressedduringthecurrentfinancialyear.
We have graded our management report observations:
—Grade1observationsarethosewherethereisariskofasignificantfinancialimpactonthe businessthatmustbeaddressedimmediately.
—Grade 2 observations are those where there is a risk of moderate financial impact on the business,forexampleacontrolfailureortheabsenceofacontrolinanareaofmoderaterisk.
—Grade3observationsarethosethatrelatetominorcontroldeficiencies orenhancementsincontrolefficiency.
Pleasedonothesitatetocontactmeifyouhaveanyquestionsaboutthisreport. Yoursfaithfully,
Mr. Brown
Partner
Grade1points Title ofpoint
RecommendationThis section should give a brief description of our recommendations, which should be clearly stated and which must be viable in a business context. It should also state the benefits of implementing the recommendations.
Management response
This must be agreed with management.
Action
Thissectionshouldgiveanactionplanfortheimplementationoftheagreedrecommendations, namingthememberofoperatingunitstaffresponsibleforimplementingtherecommendation andthedatebywhichhe/sheintendstodoso.
Grade 2 points
[Included in the same format as for grade 1 points]
Grade 3 points
[Included in the same format as for grade 1 points]