Guilin & Partners is a PA firm that has audited ZFL for the past five years. During the past year, ZFL has grown to include exports to Asia. The president and the controller both retired last year. The new management met with Guilin this year to discuss this year’s audit and hope to reduce the audit fees. ZFL’s new management suggested that since the company had received an unqualified audit opinion every year from Guilin, less audit work would be needed this year. They also suggested that there was no need for an engagement letter this year since Guilin’s staff was very familiar with the company. The managing partner at Guilin, Tim, explained to the controller that there were new accounting principles being applied this year because differential reporting rules no longer applied to the company. Tim also explained the audit process in more detail to the controller and president, who then agreed that the audit fees requested by Guilin were reasonable.
REQUIRED
Explain why you would or would not require an engagement letter this year. Support your answer.