INSTITUT DES REVISEURS D’ENTREPRISES
(adopted by the IRE Council on 20th July 2017, free translation date 29th September 2017)
STANDARD ENGAGEMENT LETTER
[to be adapted according to the type of engagement]
[To the Shareholders / the Board of Directors / the Executive Board / the Partners / the Management Board / the Management]
[Company’s name]
[Company’s address]
Luxembourg, [date]
Dear Madams/Sirs,
1. Scope of the audit
[IFRS]
[We have been requested by the Annual General Meeting [the Board of Directors / the Executive Board / the Partners / the Management Board / the Management] of [Company’s name] (“the Company”) to carry out the statutory [a contractual] audit of the [consolidated] financial statements of the Company comprising the [consolidated] statement of financial position as at [date] and the [consolidated] statement of comprehensive income, the [consolidated] statement of changes in equity and the [consolidated] statement of cash flows for the year then ended [for the period from (date) to (date)] and the notes to the [consolidated] financial statements including a summary of significant accounting policies.]
[LuxGAAP]
[We have been requested by the Annual General Meeting [the Board of Directors / the Executive Board / the Partners / the Management Board / the Management] of [Company’s name] (“the Company”) to carry out the statutory [a contractual] audit of the [consolidated] financial statements of the Company comprising the [consolidated] balance sheet as at [date] and the [consolidated] profit and loss account for the year then ended [for the period from (date) to (date)] and the notes to the [consolidated] financial statements including a summary of significant accounting policies.]
[Public-interest entities]
[We draw to your attention that as your Company is a public-interest entity as defined by Article 1 point (20) of the Law of 23 July 2016 on the audit profession, specific provisions apply both to your Company and to our engagement.]
[Public-interest entities fulfilling the criteria of large companies with more than 500 employees on average during the year[1]]
[We shall verify that the non-financial statement to be included in the [consolidated] management report [the separate report] covering the information required for the non-financial statement has been made.]
We have the pleasure to confirm our acceptance and our understanding of this engagement. Our engagement will be carried out with a view to expressing an opinion on the [consolidated] financial statements in accordance with international standards on auditing [as adopted for Luxembourg by the Commission de Surveillance du Secteur Financier].
[If the contractual audit is not to be performed in accordance with ISAs, the Réviseur d’Entreprises[2] shall add a paragraph in the engagement letter to clarify the auditing standards applied. Similarly, if the accounting standards adopted for the preparation and presentation of the financial statements differ from the accounting standards in force in Luxembourg, the Réviseur d’Entreprises shall add a paragraph in the engagement letter to clarify the accounting standards applied.]
[The Réviseur d’Entreprises may be required to report separately on the Company’s internal control. In the general terms and conditions for Réviseurs d’Entreprises, the reference to the fact that the Réviseur d’Entreprises’s consideration of internal control is not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control may not be appropriate in such circumstances. The Réviseur d’Entreprises shall add a paragraph in the engagement letter in that respect.]
[Our engagement also includes the audit of the financial statements of the foreign branches of the Company.]
All documents including the [consolidated] financial statements or extracts from the [consolidated] financial statements covered by our opinion must be provided to us before they are issued.
Further to international standards on auditing [as adopted for Luxembourg by the Commission de Surveillance du Secteur Financier], our engagement may lead us to attend the general meetings of shareholders and/or meetings of the Board of Directors [Executive Committee/Management Board]. You are responsible for keeping us informed about the dates of general meetings and meetings of the Board of Directors [Executive Committee/Management Board].
[2. Consolidated financial statements of the group
Moreover, further to international standards on auditing [as adopted for Luxembourg by the Commission de Surveillance du Secteur Financier], we accept, in our capacity as principal auditor, the responsibility of our opinion on the consolidated financial statements of the [name of parent company] group. To assume this responsibility, we may need to perform additional procedures on the reporting to the parent company from the subsidiaries and/or on the financial statements of the subsidiaries and to communicate with the external auditors of the subsidiaries. The Company must take all appropriate measures to ensure that this work may be performed.]
[3. Reporting to the external auditor of the parent company
In addition, further to the instructions from your parent company, you have asked us to carry out [“audit procedures” on; a “review engagement” of][3] the consolidation package prepared for the group [name of parent company] as at and for [the period/financial year] ending on [date] [as well as for the interim closing dates] in accordance with the instructions from the [name of parent company] group and to issue a report to [name of the external auditor], the external auditor of the group.
The consolidation package is the responsibility of those charged with governance [the Board of Directors / the Executive Board / the Partners / the Management Board / the Management]. Our work will be carried out in accordance with the instructions received from the parent company and its external auditor unless otherwise agreed. [Our report to the external auditor of the group will indicate whether, in our opinion, the consolidation package has been prepared, in all material respects, in accordance with the instructions received from [name of parent company] and in accordance with the accounting principles of the group.[4]] ]
4. Communication of audit matters to those charged with governance
We will communicate to those charged with governance [the Board of Directors / the Executive Board / the Partners / the Management Board / the Management / the Audit Committee] the planned scope and timing of the audit and our significant audit findings, including any significant deficiencies in internal control that we may identify in the course of our engagement in accordance with the communication modalities determined with you.
However, should we identify any matter arising from fraud, error or non-compliance with laws and regulations having an impact on the [consolidated] financial statements, and if this is in accordance with the legislation, we may be required to communicate such matter to those charged with governance [to the Board of Directors / to the Executive Board / to the Partners / to the Management Board / to the Management / to the Audit Committee] earlier than anticipated in the audit plan.
[Public-interest entity]
[We shall also provide those charged with governance with a statement of compliance with the relevant ethical requirements on independence and will disclose to them all relationships and other matters that may reasonably be thought to impact our independence and, where applicable, the related safeguards.]
[We shall also prepare and distribute a supplementary report to the Audit Committee or the equivalent body within the Company pursuant to Article 11 of Regulation (EU) No 537/2014 of the European Parliament and of the Council of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities and repealing Commission Decision 2005/909/EC.][5]
[Public interest entity or entity admitted to a regulated market outside the European Union]
[Among the matters communicated to those charged with governance [the Board of Directors / the Executive Board / the Partners / the Management Board / the Management / the Audit Committee], we shall determine those of most significance to the audit of the [consolidated] financial statements for the period under review: the key audit matters. We shall describe these matters in our report unless a law or regulation precludes their public disclosure or, in extremely rare circumstances, if we determine that a matter should not be included in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. If we determine, based on the facts and circumstances, that there is no key audit matter to be disclosed, we shall refer to this determination in a separate section of our audit report.]
Our communications will be prepared exclusively for those charged with governance [the Board of Directors / the Executive Board / the Partners / the Management Board / the Management / the Audit Committee], unless the engagement implicitly authorises communication to authorised third parties. Our communications may not be used for other purposes.
Our communications to be prepared for the information of those charged with governance [the Board of Directors / the Executive Board / the Partners / the Management Board / the Management / the Audit Committee] shall not be communicated to third parties without our prior written consent. This consent will only be granted on the basis that such communications are not prepared for the benefit of third parties but only for the needs of those charged with governance, [the Board of Directors / the Executive Board / the Partners / the Management Board / the Management / the Audit Committee] to whom they are addressed. Consequently, we are not liable or responsible to third parties.
5. Audit report
[IFRS]
[Our audit report to the Shareholders [the Board of Directors / the Executive Board / the Partners / the Management Board / the Management] will state whether, in our opinion, the accompanying [consolidated] financial statements present fairly, in all material respects, [or give a true and fair view of] the [consolidated] financial position of the Company [Group] as at [date], and [of] its [consolidated] financial performance and its [consolidated] cash flows for the year then ended [for the period from (date) to (date)] in accordance with International Financial Reporting Standards (IFRS) [as adopted by the European Union.]]
[LuxGAAP]
[Our audit report to the Shareholders [the Board of Directors / the Executive Board / the Partners / the Management Board / the Management] will state whether, in our opinion, the accompanying [consolidated] financial statements present fairly, in all material respects, [or give a true and fair view of] the [consolidated] financial position of the Company [Group] as at [date], and of the [consolidated] results [of] its operations for the year then ended [for the period from (date) to (date)] in accordance with Luxembourg legal and regulatory requirements relating to the preparation and presentation of the [consolidated] financial statements.]
[We shall also state whether the [consolidated] management report, which is the responsibility of the Board of Directors [Executive Board / Management Board], is consistent with the [consolidated] financial statements] and has been prepared in accordance with the applicable legal requirements.]
[Public-interest entities]
[We shall also state whether the information contained in the governance statement required by Article 68ter paragraph (1) (c) and (d) of the Law of 19 December 2002 on the register of commerce and companies and the accounting and annual accounts of undertakings, as amended, which is the responsibility of the Board of Directors [Executive Board / Management Board], is consistent with the [consolidated] financial statements and has been prepared in accordance with the applicable legal requirements.]
[Public-interest entities]
[We shall confirm that:
· [our audit opinion is consistent with the content of the additional report to the Audit Committee or the equivalent body,][6]
· we have not provided prohibited non-audit services as defined by Regulation (EU) No 537/2014 and have remained independent of the Company [Group] in conducting the audit.]
The form and content of our report may need to be amended according to our audit findings.
We shall accept liability solely for the observations and content of our final written report issued on completion of our audit which includes the conclusions of our audit.
6. Written representations
In the course of our engagement and in accordance with international standards on auditing [as adopted for Luxembourg by the Commission de Surveillance du Secteur Financier], we shall request those charged with governance [the Board of Directors / the Executive Board / the Partners / the Management Board / the Management] to confirm in writing all representations that have been made to us during the course of our engagement.
This representation letter must be received by us prior to the issuance of our audit report on the [consolidated] financial statements.
[7. Professional secrecy of the Réviseur d’Entreprises [Agréé]
Pursuant to the Law of 23 July 2016 on the audit profession, our staff and ourselves are required to maintain professional secrecy and a strict level of confidentiality in respect of any information obtained in the course of our engagement. Nevertheless, we may be required to communicate Company information within our network as part of our quality control, independence monitoring and risk management procedures.
8. Protection of personal data
As part of the communication mentioned in the preceding paragraph, we may be required to process Company information relating to specific individuals ("personal data") in countries in which we intervene during our engagement. We undertake to treat personal data in accordance with the legislation on the protection of individuals regarding the processing of personal data.][7]
9. Fees
“Free text”
[Our fees, to be billed as our work progresses, are based on the time required by the individuals assigned to the engagement plus out-of-pocket expenses. Individual hourly rates vary according to the responsibility and experience of those involved. Should any additional costs arise during the course of our engagement, we shall discuss and agree them with you. We estimate that our audit fee will be approximately EUR [indicate the amount], excluding VAT and out-of-pocket expenses.]
10. Duration of our engagement
This engagement letter is drawn up for a period of [insert duration] year[s] and may be terminated for good cause. A difference of opinion on an accounting treatment or a control procedure is not a valid ground for termination.