We have been engaged to audit and report on the financial statements of the company to be presented to the shareholders. Accordingly, we are required by the Companies and Allied Matters Acts of Nigeria, CAP C20 LFN 2004 to carry out our audit free of any restrictions. Although we will be pleased to advise and assist, the maintenance of proper accounting records and the preparation of the financial statements are the responsibilities of management.
Your responsibilities include fair presentation, in all material aspects, of the financial position, financial performance and cash flow of the company, in compliance with International Financial Reporting Standards and in the manner required by the Companies and Allied Matters Act of Nigeria CAP C20 LFN 2004. Our responsibility is to express our opinion on these financial statements.
In making our risk assessment, we consider internal control relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances. However, we will communicate to you in writing concerning any significant deficiencies in internal control relevant to the audit of the financial statements that we have identified during the audit.
- Our responsibilities
We will perform the audit engagement in accordance with international standards on Auditing (ISA), and the financial statements will be presented in line with the disclosure requirements as stipulated by International Financial Reporting Standards. This standard requires that we comply with high quality control standard and relevant ethical requirements, including ethical principles of integrity, objectivity, professional competence, due care and diligence.
Our engagement cannot be relied upon to disclose whether fraud or errors, or illegal acts exist during the financial reporting period. However, we will inform you of any such matters which come to our attention.
The information will be prepared in accordance with International Standards on Auditing and Nigerian Standards on Auditing issued by the Institute of Chartered Accountants of Nigeria and in the manner required by the Companies and Allied Matters Act, CAP C20 Laws of the Federation of Nigeria. Any known departures from this framework will be disclosed within the financial statements and when considered necessary will be referred to you in our compilation report.
As part of our engagement, we will issue our report attached to the audited financial statements, which will describe the audited financial statements and the work we performed for this engagement. The report will also note that the use of the financial statements is restricted to the purpose set out in this engagement letter, and that use and distribution of our report provided for the compiled financial statements is restricted to you, as management.
- Responsibilities of Management
The compilation engagement to be performed is conducted on the basis that management acknowledges and understands that our role is to assist management in preparing and presenting the financial statements in accordance with the financial reporting framework adopted by management for the financial statements. Accordingly, management has the following overall responsibilities that are fundamental to undertaking the compilation engagement:
(a) The management conduct the daily operations of the business;
(b) Any representations made by you or the company to third parties, including published information;
(c) The maintenance of the accounting records that fairly represents the state of affairs and business of company;
(d) The establishment and maintenance of an internal control structure necessary to provide reasonable assurance that adopted policies and prescribed procedures are adhered to for the prevention of errors and irregularities, including fraud and illegal acts;
(e) Adoption of efficient financial reporting framework to guarantee the safe keep of business assets
(f) Selection of appropriate accounting policies under the applicable financial reporting framework that are to be applied in compiling the financial statements;
(g) Acceptance of responsibility for the financial statements that we compile.
(h) The safeguarding of assets;
(i) The use of , or implementation of advice or recommendation supplied by us, or other services;
(j) Providing us with access to all information of which management is aware that is relevant to the preparation of the financial statements such as records, documentations and other matters;
(k) Providing us with additional information that we may request for the purpose of the compilation;
(l) providing us with unrestricted access to persons within the company from whom we determine if necessary to obtain information; and
If we have any comments affecting the form and contents of the annual financial statements, we will discuss these with the directors.
Any withholding of information could be considered as a limitation of the scope of our compilation engagement and may prevent us from completing the engagement.
Any delay in providing us with the required information may affect our ability to comply with the agreed timetable.
- Future Use of the audit opinion
Any agreement to perform work in connection with an offering, including an agreement to provide such permission or consent, will be a separate engagement and subject to a separate engagement contract. You agree that our audit report, or reference to us, will not be included in any such offering document without our prior written permission or consent.
- Additional deliverables
The work we undertake to support any conclusions reached in additional deliverables that we have agreed to, will be limited to the work we undertake for reaching our conclusion. Any advice and recommendations will therefore be limited by the scope of our work, and may not cover all issues which might arise from a specific in-depth review. Any use made of our advice and recommendations should be viewed in this light.
Any product of the services released to you in any form or medium will be supplied by us on the basis that it is for your benefit and information only and that it may not be copied, referred to or disclosed, in whole or in part (save for your own internal purposes), without our prior written consent. The services will be delivered on the basis that you may not quote our name or reproduce our logo in any form or medium without our prior written consent. You may disclose in whole any product of the services to your bankers and legal and other professional advisers for the purpose of seeking advice in relation to the services, provided that when doing so you inform them of:
a) Disclosure by them (save for their own internal purposes) is not permitted without our prior written consent; and
b) We accept no responsibility or liability whatsoever and neither do we owe any duty of care to them in connection with the services.
- Third party rights
The service contract will not create or give rise to, nor will it be intended to create or give rise to, any third party rights.
Our report is intended for the benefit of those to whom it is addressed. The compilation will not be planned or conducted in contemplation of reliance by any third or with respect to any specific transaction. Therefore, items of possible interest to a third party will not be specifically addressed and matters may exist that would be assessed differently by a third party, possibly in connection with specific transaction.
Any contractual arrangements between you and third party which seek to impose such requirements upon us will not, as a matter of law, be binding on us. The company agrees that it will not seek us to commit to providing reports to third parties unless we have consented to do so in advance .We may decline to provide reports to third parties, save for those reports required by law or regulations. We will stipulate the terms upon which those reports will be provided should we agree to provide such reports in a capacity other than being your compiler. The company will assist us in agreeing the terms upon which we will report to third parties. Any such possible requirements must be discussed with us at the earliest opportunity and well before the loan agreement or other arrangement is finalized. In this regard, however, it is our policy not to extend our duty of care in respect of our report in the financial statements.
Where we agree to provide reports to third parties. It remains the company’s responsibility to provide us with copies of the relevant contract documents and with any further information or explanations we may require, enabling us to prepare our report.
We will not, in giving our report, accept or assume responsibility (legal or otherwise) or accept liability for or in connection with any other purpose for which our report may be used, or to any other person to whom our report is shown or into whose hands it may come, and no other persons shall be entitled to rely on our report save where they have obtained our prior written consent that they may do so. If we have to accept responsibility to the third party, we will require their acceptance of limitation of liability as a condition of providing a report to them and reserve the right to charge additional fees.
You will indemnify standard practice professional contracting party and any standard practice professional persons and hold them harmless against any loss, damage, expense or liability incurred by the parties and/or persons as a result of, arising from, or in connection with a combination of the following two circumstances.
a) Any breach by you of your obligations under the service contract; and
b) Any claim made by a third party or any other beneficiaries which results from or arises from or is connected with any such breach.
- Electronic Communications
We may choose to communicate with you by electronic mail or internet where an authorized person wishes us to do so, on the basis that in consenting to this method of communication, you accept the inherent risks of such communications (including the security of risks of interception of or unauthorized access to such communications, the risks of corruption of such communications, the risk of errors or loss of information and risks of viruses and other harmful devices) and that you will perform virus checks. We will use commercially reasonable procedures to check for the most commonly known viruses before sending information electronically.
The exclusion of liability in the previous clause shall not apply to the extent that any liability arises out acts, omissions or misrepresentations which are in any case criminal, dishonest or fraudulent on the part of our respective partners, directors, employees or agents.
- Ownership of and access to inspect files
The working papers and files for this engagement created by us during the course of the compilation, including electronic documents and files, are the sole property of standard practice professional and you have no right to access them. We may decide in our own sole discretion to grant access to you to our working papers, should you wish to.
We have set quality control policies for the retention of documentation, after which time we will commence the process of destroying the contents of our engagement files. To the extent we accumulate any of your original records during the engagement; those documents will be returned to you promptly upon completion of the engagement.
We will retain ownership of the copyright and all other intellectual property rights in the product of the services, whether oral or tangible, including written advice, methodologies, software, systems know how and working papers. For the purposes of delivering services to you or other clients, we will be entitled to use or develop knowledge, experience and skills of general application gained through performing the services. You agree to keep confidential any methodologies and technology used by us to carry out our services. If you wish to distribute copies of any of these materials, this will require our prior written permission.
We have the right to use your name as a reference in proposals or other similar submissions to other prospective clients, unless you specifically withhold permission for such disclosure. If we wish to use details of the work done for you for reference purposes, we will obtain your permission in advance.
- Circumstances beyond our or your control
Neither of us will be in breach of our contractual obligations, nor will either of us incur any liability to the other, if we or you are unable to comply with the services contract as a result of any cause beyond our or your reasonable control. In the event of any such occurrence affecting one of us, that one shall be obliged as soon as reasonably practicable to notify the other, who will have the option of suspending or terminating the operation of the services contract on notice, which notice will take effect immediately on delivery thereof.
- Waiver, assignment and subcontractors
Failure by any one of us to exercise or enforce any rights available to us shall not amount to a waiver of any rights available to either of us. However, neither party should be liable in any way for failure to perform, or delay in performing, our respective obligations under this engagement if the failure or delay is caused outside reasonable control of the failing party.
Neither of us will have the right to assign the benefit or burden of the services contract without the written consent of the other.
We will have the right to appoint subcontractors to assist us in delivering the services.
- Exclusion and Limitations on our liability
The maximum liability of standard practice professional or any individual partner/director, member, employee or agent, as the case may be, of standard practice professional contracting party in respect of direct economic loss or damage suffered by you or by other beneficiaries arising out of or in connection with the services shall be limited to one hundred percent (100%) the fees charged and paid for these services. The maximum liability will be an aggregate liability for all claims arising, whether by contract, delict, negligence or otherwise.
In the particular circumstances of the services set out in the engagement letter, the liability to you and to other beneficiaries of each and all standard practice professional persons in contract or delict or under Memorandum of Incorporation or otherwise, for any indirect or consequential loss or damage (including loss of profits) suffered by you (or by any such other party) arising from or in connection with the services, however the indirect or consequential loss or damage is caused, excluding our wilful misconduct, shall be excluded to the extent that such limitation is permitted by law.
Our liability to you will under no circumstances exceed the lower of the amount determined by the application of the monetary limit based upon fees charged to, and recovered from, you and the amount determined by the apportionment of responsibility, as the case may be.
You and other beneficiaries may not bring any claim personally against any individual partner/directors, member, employee or agent, as the case may be of standard practice professional contracting party or of anybody or company controlled by us or owned by us or associated with us in respect of loss or damage suffered by you or by other beneficiaries arising out of or in connection with the services. You agree that any claim of any sort whatsoever arising out or in connection with this engagement shall be brought only against standard practice professional. This restriction shall not operate to limit or exclude the liability of the standard practice professional contracting party for the acts or omissions of its partners/directors, members, employees and agents. Any claim by you or other beneficiaries must be made (for these purposes a claim shall be made when court or other dispute resolution proceedings are commenced) within two years of the date on which you or they became aware, or ought reasonably to have become aware, of circumstances giving rise to a claim or potential claim against us.
- Time table
We will agree on a timetable to enable you to meet your statutory obligations to issue annual financial statements and to meet any other deadlines you have brought to our attention. However, any such timetable will be based on the assumption that we will receive the appropriate cooperation and assistance to perform an effective and efficient audit.
We will render invoices in respect of the services comprising fees, disbursements and VAT thereon (where appropriate), together with any other foreign taxes (if applicable) (‘fees’) that might be payable thereon.
Our fees are based on the time spent on your affairs by our partners/directors and staff, and on the levels of skill and responsibility involved, the nature and complexity of the services and the resources required to complete the engagement. These fees may differ from estimates that may have been supplied, of which estimates will only be provisional.
Fees are calculated on an hourly basis at charge out rates applicable to the person undertaking the work. Stringent reporting requirements or deadlines imposed by you might require work to be carried out at a higher level than usual or in extreme cases outside normal working hours. This will result in increased costs. Our current maximum and minimum rates for normal work within normal working hours applicable from time to time may be obtained on request.
Disbursements in respect of traveling expenses, photocopies, stationery, revenue stamps, postage, e-mails and telephone calls will be recoverable at our predetermined rates.
Our fees estimate is based on the assumption that the information we require is made available to us in accordance with the agreed timetables, and that key executives and personnel are available during the course of our work. If delay or any other problems beyond our control occur, this may result in additional fees for which invoices will be raised on the above basis.
In return for the delivery of the services by us, you will be required to pay our fees, without any right of setoff, on presentation of our invoice.
Delivery of our services shall mean:
a) Audit: Five working days after our delivery of draft financial statements or upon our delivery of financial statements, whichever is the sooner.
b) Taxation Services: Upon rendering advice or upon dispatch or documents or correspondents to you or to inland authorities as appropriate.
c) Consulting and Other Services: Upon rendering advice or upon dispatch of correspondence as appropriate.
We will be entitled to raise fees upon delivery as set out above. In the event you are not in agreement with any fee raised you will notify us in writing of your objection within seven (7) working days of our dispatch of the invoice. Failure to do so will constitute acceptance of the fee. Approval of financial statements or minutes reflecting our fees will constitute acceptance of the fees, including any under provision which does not warrant redrawing the financial statements.
Notwithstanding anything to the contrary contained herein, should our accrued fees reach a level which we consider to be material, such accrued fees will become due and payable immediately upon presentation of our invoice, failing which, the rendering of all further professional services will be suspended pending receipt of payment.
In the event of your appointing an alternative firm in our stead, or otherwise terminating our mandate, we will be entitled to raise a fee upon receipt of such notification for an amount adequate to cover all work done to date and not yet billed, at our standard charge out rates, including disbursements incurred. In such event you undertake to settle our account in full prior to our handing over of books and records to you or to our successor.
Our fees will be inclusive of Value Added Tax (VAT) since it is a vatable service as mandated by the Value Added Tax Act CAP VI LFN 2004. Subject to the aforegoing, our fees are payable on presentation. We will be entitled to charge interest on all amounts outstanding, for whatsoever reason, for more than 30days from the date of presentation of our invoice at the maximum rate allowed by law. Such interest will be calculated on a monthly basis. All payments will be allocated first as to interest, then as to outlays, then to the longest outstanding fee.
Without prejudice to any other rights that we may have in law, we reserve the right to suspend or terminate the performance of the services or any part thereof to you immediately, at any time, with or without notice, should payment of any of our fees become overdue.
The fees will be subject to review by us each year and will vary with a number of factors, including the extent of the assistance we receive from members of staff in preparing routine schedules and analyses.
It is our usual practice to provide estimates of our fees in advance of the work commencing and we shall require payments on account as our work progresses.
- Quality of Service
We will seek to ensure that our service is satisfactory at all times and delivered with reasonable skill and care. If at any time you would like to discuss with us how the service can be improved, you are invited to contact us.
A requirement of the FRC is to provide excellent quality audit work, in order to achieve this, we are required to review certain of your files internally. Independent third-party reviewers may be utilized to facilitate this process. The person or institution that will be selected by us will be required by us to sign a confidentiality agreement and will treat all information inspected with the strictest of confidence.
- Economic and Financial Crimes Commission (Establishment) Act of 2004
In terms of Economic and Financial Crimes Commission (Establishment) Act of 2004 we are required by law to report to the Economic and Financial Crimes commission certain suspicious or unusual transactions, such as those which may involve money laundering, which have no apparent business or lawful purpose, or which may be relevant to an investigation of evasion or attempted evasion of tax. This statutory requirement, which applies to both prospective clients and existing clients, overrides the professional ethics rules of confidentiality, which we observe.
- Intellectual Property rights
We retain all copyright and other intellectual property rights in everything developed by us either before or during the course of an engagement including systems, methodologies, software, know-how and working papers.
We also retain all copyright and other intellectual property rights in all reports, written advice or other materials provided by us to you although the fees you pay us will allow you to use those materials for the purpose for which they were created under this engagement. If you wish to distribute copies of these materials outside your own organization, this will require our prior written permission.
Our staff members undergo periodic training and this, together with the taking of annual leave, may lead to staff turnover and lack of continuity. We will use our best endeavors to avoid any disruption to an engagement’s progress.
Save as envisaged below, you agree not to make any offer of employment or to otherwise interfere with or entice away from the employment of any persons employed by standard practice professional. You further agree not to use such person’s services as an independent consultant or via a third party for period of 12months following the end of such person’s involvement, without the prior written consent of standard practice professional.
Should you make any offer of employment to any person currently employed by standard practice professional or who was employed by standard practice professional for the immediately preceding twelve months period from the date of such offer of employment, you will be liable for and will pay to standard practice professional a placement fee equal to ten percent (10%) of such employee’s total annual cost to company, excluding Value Added Tax.
- Use Of standard practice professional Software
We may develop software, including spreadsheets, documents, and databases and other electronic tools to assist us with our assignment. In some cases these aids may be provided to you upon request. As these tools were developed specifically for our purposes and without consideration of any purpose for which might use them, they are made available on an “as is” basis for your use only and should not be distributed to or shared within any third party.
Further, we make no representations or warranties as to the sufficiency or appropriateness of the software tools for any purpose for which you may use them. Any software tools developed specifically for you will be covered under a separate engagement letter.
- Health and Safety
We acknowledge our statutory responsibility to co-operate with your health and safety requirements, provided we are given notice of these. Whilst on your premises, our directors, staff and sub-contractors shall be afforded by you the same protection for health and safety purposes as is due to your employees.
If we are required by you to enter the premises of a third party you will procure that the third party also affords such protection to our partners, directors, staff and subcontractors as is due to your employees.
For the purposes hereof, we agree that our domicilium citandi et executandi shall be as follows: Ours at 44, Ikorodu Road, Fadeyi, Lagos, Nigeria.
- Future years
We propose that the engagement letter will be in place until replaced. If circumstances change, we will issue a new engagement letter. Until such time, this letter will be in force even where there is a change in group structure.
Please confirm your agreement with the terms contained in this letter by countersigning and returning to us the enclosed copy. If there is anything that you do not agree with or wish to amend, please contact us.