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Using your letterhead: Not as inconsequential as it seems

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The syndic's column

As a client service, you print and collate the engagement report and the final financial statements. Printing the engagement report such as a Notice to Reader, Review Engagement Report, or Independent Auditor’s Report on your letterhead is acceptable and common practice. However, using your letterhead for individual pages of the financial statements might not be good risk management practice. Here are five reasons why:

  1. In a compilation engagement, you are simply compiling the financial statements from information provided by your client and having the financial statements on your letterhead may suggest a higher level of involvement than is appropriate;

  2. No matter the type of engagement, the financial statements are management’s responsibility;

  3. You go to great length to make sure your clients take responsibility for their financial statements by having them sign an engagement letter, a management representation letter and approve journal entries;

  4. Assurance standards require management to approve and take responsibility for the financial statements prior to you finalising the report;

  5. It is logical to put the report or communication attached to the financial statements on your letterhead since it is your signature at the bottom of the page.

For all these reasons, printing all pages of the financial statements on your letterhead sends the wrong message to your client and third parties using those financial statements.