October 21, 2011
Mr. Larry Lancaster
Chairman, President and CEO
Apollo Shoes, Inc.
Dear Mr. Lancaster:
This letter documents our mutual understanding of the arrangements for the services described herein.
Scope of Services
Anderson, Olds and Watershed (AOW) will audit the balance sheet of Apollo Shoes as of December 31, 2011 and the related statements of income, retained earnings and cash flows for the year then ended. Our audit will be conducted in accordance with the Standards of the Public Company Accounting Oversight Board (PCAOB). Our audit will include examining, on a test basis, evidence supporting the amounts and disclosures in financial statements, assessing the accounting principles used ad significant judgments and estimates made by management, as well as evaluating the overall financial statement presentation.
An audit includes obtaining an understanding of internal control sufficient to plan the audit, including making risk assessments, and to determine the nature and extent of audit procedures to be performed. An audit is not designed to provide assurance on internal control or to identify control deficiencies. However, we are responsible for communicating to the Board of Directors of Apollo Shoes significant deficiencies and material weakness in internal control that come to our attention during the course of our audit.
AOW is required to obtain reasonable assurance that the financial statements are free from material misstatements, whether caused by error or fraud. However the audit does not guarantee the accuracy of the financial statements. Even though the audit is properly planned and performed in accordance with the PCAOB standards, an unavoidable risk exists that some material misstatements may not be detected due to inherent limitations of an audit, together with the inherent limitations of internal control. Consequently, our audit is not designed to detect errors or fraud that is immaterial...