ACKNOWLEDGEMENT

In performing our accounting information system and internal control structure

consultancy study, first we would like to give our sincerest gratitude to the proprietor of
REALFORD Enterprises, Mr. Rex Alford J. Lagarto, the firm subject to this consultative
study, for his invaluable time in giving us information filled with veracity which paved
way in coming up with this output
We would also like to thank SPSPS Library for giving us a plethora of references
for this output as well as the location in the piecemeal realization of this work.

The consultancy team would also like to extend its deepest gratitude to the
Soledad family in Tacloban City for the accommodation.

Also to our dearest merciful and compassionate instructor Ma’am Rosanna

Romanca, CPA, who guided us during the course of our audit and for her unwavering
support throughout the whole journey.

Finally, we praise and glorify, our Lord God Almighty for the strength, dedication,
blessings and an overwhelming divine intervention to pursue this audit working paper.

-The Authors
 THE INTERNAL CONTROL AND ACCOUNTING INFORMATION
SYSTEM CONSULTANCY PROCESS
PRE – ENGAGEMENT ACTIVITIES
Prior to accepting the engagement with Realford Enterprises, our consultancy team conducted a
series of assessments whether to accept or reject the engagement. The following were the
considerations:

1. Integrity of a client’s management and governance personnel.

i. The firm considers the client’s honesty and truthfulness. The client must have never
revealed confidences, or impugned the integrity of others or their businesses.
ii. The client must be well served in maintaining control in internal and external transactions
and maintain and look upon their members on performing all professional responsibilities
with the highest sense of integrity.
2. Competence and Capabilities.

Profitability of the company gives us a built-in indicator of competence, also their ability to
navigate capital markets, vision, deep understanding of the company’s specialty, ability to
delegate, sales and financial skills and adaptability.

3. Meeting the ethical requirements.

The firm must comply with the policies and procedures designed to provide reasonable assurance
relevant to ethical requirements such as integrity, objectivity and independence.

In considering whether the firm has the capabilities, competence, time and resources to
undertake a new engagement, the following are the matters the firm considers:

 Our firm personnel have knowledge of relevant industries or subject matters, and
experience with relevant regulatory or reporting requirements.
 Our firm has the ability to gain the necessary skills and knowledge effectively.
 Our experts are available, if needed.
 Our firm is able to complete the engagement within the reporting deadline.
 Our firm is already established as one of the bests in the industry

PRELIMINARY MEETING
A preliminary meeting was arranged by the consultancy team with the client to discuss the
acceptance of the accounting inforamation system consultancy arrangement. Discussions were
made and some information were disclosed such as the current status of the internal control of
the said firm and plans for future expansion.
To the Management of REALFORD Enterprises:

The Consultancy Team of Lucky 13 Company has performed all the

procedures agreed with you as prescribed in the engagement letter. The
procedures were performed solely to assist you in evaluating as well as
improving the state of your accounting information systems and internal
control mechanisms and are summarized as follows:

 Inquire from the proprietor of the business, Mr. Rex Alford J.

Lagarto, about the nature of the business, which includes the
transactions occurring within the entity
 Inspect and Scrutinize, the enterprise’s current transaction flows
as well as current source document supporting such transactions as
well as observe the transaction and operation cycle of the business,
which included observing the movement of inventory from the time
of order from supplier down up to delivery to the customer,
considering the Just In Time System
 As well as inquire from the proprietor, about his plans for
expansion, in order for the team to provide the firm with proposed
controls and measures.
 After accumulating the necessary data , the consultancy team will
be able to come up with the necessary accounting information
 system protocols and internal control measures as well as the
relevant source documents.

Having considered the loopholes or defects detected during the

observation, the consultancy firm would like to recommend to
REALFORD Enterprises to enact the following measures:

 For the current state, the firm should make sure to come up with a
system to produce financial statements, consider to create legal
documents to augment and fortify goodwill/ fiduciary relationships
with other parties, and several other measures
 For its intended expansion, the consultancy team would like to
suggest to the firm to hire more than three employees with
segregated tasks to sustain the measures, and help in the
supervision of the business, the team has proposed, to also employ
systems fortified with internal control measures, and further
supplanted by relevant source documents, to better assess the
business.

ENGAGEMENT LETTER
Lucky13 Co.
 6969 Virgin Avenue, Campetic Rd.
Palo, Leyte 6501
Philippines

Phone: (639) 266096969

Fax: (955) 969 669
www.lucky13co.com.ph

BOA/PRC Reg. No. 04969

January 29, 2017,
valid until January 30, 2020
SEC Accreditation No. 0429-FR-5 (Category
A)
June 14, 2017, valid until June 15, 2020
October 3, 2019

REALFORD ENTERPRISES
Sta.Rita, Samar

To the Proprietor/Owner;

Gentlemen:

Your company has requested that we inspect the internal control structure of Realford Enterprises for
purposes of improving it as well as provide an ideal accounting information system that will be in
consonance to your planned expansion.We are pleased to confirm our understanding of the services we
are to provide you with under this engagement.

We will be interviewing you as well as scrutinize and inspect the Company's internal control structure and
transaction cycles or processes, for the purpose of expressing an opinion on them , giving way for our
recommendation to better the security environment of your firm. Aside from financial statements, taking
enormous care and detail of the internal control structure is also of utmost responsibility for the company
management. Our responsibility is to express an opinion on the internal structure and also come up with
suggested internal control measures and source documents based on our scrutiny.

We will conduct our consultancy in accordance with high standards relevant to the scrutinty of internal
control structure and accounting information system. Those standards require that we plan and perform
the consultancy process to obtain information to coming up with recommendations to better the firm’s
internal control structure.

Although the consultancy procedure is designed to provide reasonable assurance of detecting errors and
irregularities to the internal control structure, it is not designed and cannot be relied upon to disclose all
fraud, defalcations, or other irregularities.

We remind that the responsibility for the designing and implementation of internal control measures
accounting information system including adequate disclosure is that of the management of the company.
This includes the maintenance of adequate accounting records and internal controls, the selection and
application of appropriate measures and procedures in the safeguarding of the assets of the company. As
part of our consultancy process, we will request from management written confirmation concerning
representation made to us in connection with the consultancy.
Our fees will be billed as work progresses and are based on the amount of time required plus out-of-
pocket expenses. Invoices are payable upon presentation. We will notify you immediately of any
circumstances we encounter that could significantly affect our initial estimate of total fees. Our standard
hourly rates vary according to the degree of responsibility involved and the experience and skill level of
the personnel assigned to your engagement.

We appreciate the opportunity to be of service to you, and believe this letter accurately summarizes the
significant terms of our engagement. If these comments and arrangements meets with your approval,
please sign below and return the agreement to us.

We look forward to a pleasant association and the opportunity to provide the services included in this
engagement. If you have any questions, please let us know.

This letter will be effective for future years unless it is terminated, amended, or superseded.

Please sign and return the attached copy of this letter to indicate that it is in accordance with your
understanding of our arrangements for our consultancy of the internal control structure.

Yours faithfully,

ZAINA GAIL S. CORTEZ, CPA

Partner-In-Charge
CPA Cert. No. 0095865
PTR No. 0013457, issued on January 6, 2015, Makati City
SEC A.N. (individual) as general auditors 0668-AR-3, Category A; effective until March 1, 2020
SEC A.N. (firm) as general auditors 0009-FR-5, Category A; effective June 15, 2020
TIN 123-456-789
BIR A.N. 08-000745-47-2016, issued on February 15, 2017; effective until February 14, 2020
BOA/PRC Reg. No. 0142, effective until September 30, 2020

We agree to the terms of this letter;

REX ALFORD J. LAGARTO ,CPA

Proprietor, REALFORD ENTERPRISES