Quality Animal Hospital

July 31, 2007

Dr. John Smith

Quality Animal Hospital

1234 Pleasant Lane

Anytown, US 12345

Dear Dr. Smith:

We would like to take this opportunity to confirm with you our understanding of the scope of services that our firm is to provide for Quality Animal Hospital for the year ended December 31, 2005. The following paragraphs define the nature and the extent of the accounting and tax functions that we will perform:

1.  To discuss such suggestions and recommendations concerning your accounting methods and financial affairs as we consider appropriate with you and/or your selected personnel.

2.  To prepare the necessary federal and state tax returns with supporting schedules as indicated:

a.  Form 11208 U.S. Small Business Corporation Income Tax Return

b.  Form 4 – Wisconsin Corporation Franchise or Income Tax Return

c.  Form 1040 U.S. Individual Income Tax Return and for John Smith, DVM, and Form 1 Wisconsin Individual Income Tax Return for John Smith, DVM

To examine assessment notices relative to these returns; to advise on income tax matters generally; and to discuss any matters concerning your taxes with IRS, as appropriate.

3.  To adjust the books and records within QuickBooks for the quarters ended March 31, 2005 and June 30, 2005.

4.  To assist in the preparation of the financial statements for your use as required:

We will compile, from information your provide, the balance sheet and related statements of income, retained earnings, and cash flows of Quality Animal Hospital for the periods ended September 30, 2005 and December 31, 2005. We will not audit or review such financial statements. Our report on the financial statements of Quality Animal Hospital is presently expected to read as follows:

“We have compiled the accompanying balance sheet of Quality Animal Hospital as of December 31, 2005, and the related statements of revenues, expenses and retained earnings – income tax basis, for the year then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. The financial statements have been prepared on the accounting basis used by the Company for income tax purposes, which is a comprehensive basis of accounting other than generally accepted accounting principles.

A compilation is limited to presenting in the form of financial statements information that is the representation of management. We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or any other form of assurance on them.

Management has elected to omit substantially all of the disclosures required by generally accepted accounting principles. If the omitted disclosures were included in the financial statements, they might influence the user’s conclusions about the company’s financial position, results of operations, and changes in financial position. Accordingly, these financial statements are not designed for those who are not informed about such matters.

If, for any reason, we are unable to complete our compilation of your financial statements, we will not issue a report on such statements as a result of this engagement.

At the time each financial statement is completed, we will schedule a telephone conference to review the results and make appropriate suggestions and recommendations for improving results. We may integrate an analysis of PSI statistics to complement our review. After the September 30, 2005 results are prepared, we will project fourth quarter net income and discuss various tax strategies in an attempt to minimize your tax obligations at the end of the year, as well as plan any year end cash requirements.

Our engagement cannot be relied upon to disclose errors, fraud, or illegal acts that may exist. However, we will inform you of any such matters that come to our attention unless they are clearly inconsequential.

Assistance by your employees in the preparation of schedules and analysis of accounts has been discussed and coordinated with Susan Bookkeeper. Timely completion of the following work will assist us in achieving the best performance in the minimum time:

a.  A balanced monthly QuickBooks computer general ledger

b.  Monthly PSI reports including an aged account receivable schedule

c.  Monthly bank reconciliations prepared utilizing QuickBooks

d.  Details of any new notes payable during the fiscal year

e.  Details of loans due to or from the practice

f.  Analysis of general or miscellaneous columns in cash receipt/cash disbursement journals

g.  Copies of quarterly payroll tax returns

In addition to the above, management is responsible to inform us of the following (the list is not means to be all inclusive):

h.  The sale or purchase of any items not normally held for resale

i.  Details of new loans during the year

j.  Any liens or encumbrances on assets and to what extent assets have been pledged

k.  Whether there are any disputes with customers or other material liabilities not recorded

l.  Details (preferably copies) of building or equipment leases

m.  Events occurring subsequent to the balance sheet date that would require adjustment to, or disclosure in, the financial statements

Our fees for services will generally be on time expended and out-of-pocket expenses. However, they might also include other factors deemed relevant, including the difficulty of the questions and the skill required to perform the accounting, tax, or other services properly; time limitations imposed either by you or the circumstances; the nature and length of the professional relationship between us; and the experience, reputation and ability of the accountant or accountants assigned to the engagement. Our invoices for these fees will be rendered each month as work progresses and are payable upon presentation. Amounts outstanding over 30 days will be considered delinquent and will be subject to an interest charge of 1% per month (annual percentage rate of 12%). In accordance with firm policies, work may be suspended if your account becomes 60 days or more overdue and will not be resumed until your account is paid in full.

Your acceptance below evidences our mutual agreement that the situs of this contract is Connecticut, and that any subsequent action concerning the same shall be brought and maintained in Connecticut, in the Judicial District of New Haven. You also agree that Connecticut law shall be applied to resolve any dispute that may arise out of this agreement.

Any additional accounting services to be provided and not outlines in this letter should be discussed for fee arrangements prior to the start of work. Our standard hourly rates range from $70/hour for staff personnel to $275/hour for officers.

It is the responsibility of the officer in charge to insure that you will receive good service. He will then be assisted by other members of the staff and he will call upon other officers in the firm whenever a second point of view or a specialized knowledge is necessary.

We have enjoyed our past association with you and your staff and appreciate the opportunity to continue serving your firm. Please indicate your approval of these terms by signing this letter in the space provided and returning it to us.

Sincerely,

Gary I. Glassman

Certified Public Account

Approved

By ______

Date______