Apollo Shoes Engagement Letter

Dear Mr. Smith, This letter confirms our understanding of the arrangements for our audit of the financial statements of Apollo Shoes, for the year ending December 31, 2012. We will audit Apollo Shoe’s balance sheet as of 12/31/2012, along with the related income statement, statement of retained earnings, and statement of cash flows for the entire year of 2012. We will provide a professional opinion based on the information found in the audit. All of the financial statements will be the responsibility of your management team.

SDM Audit’s responsibility is to express an opinion on the financial statements based on the information found in our audit. The audit will be conducted in accordance with generally accepted accounting standards in the United States of America. Under these standards we are required to obtain reasonable assurance that the statements provided are free from material misstatements whether by fraud or error. We are also required to obtain reasonable assurance that the financial statements are not misleading.

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Please be advised that this audit will not necessarily find all errors or fraud especially if the error or fraud is immaterial. With that being said a material misstatement could also possibly go undetected. However we will inform you of all material misstatements we discover while conducting this audit. Understanding internal controls is necessary to plan and complete the audit. The audit is not designed to obtain any type of reasonable assurance about these controls.

If any significant deficiencies within the internal control system are discovered during the audit we will express concern to management, and the audit team will be made aware our findings. Not only will our firm be conducting a number of procedures to test the validity of transactions as well as obtaining confirmation of all liabilities and receivables from all parties including but not limited to vendors, customers, banks, as well as creditors.

As part of our engagement for the year ending December 31, 2012, we will also prepare the company’s federal and state income tax returns for Apollo Shoes. Someone will be assigned throughout year 2013 regarding any proposed tax issues or business policies. The timing of the audit is attached to this letter. This checklist will ensure that all audit objectives will be completed in a timely manner. The fees we will be charging will be billed to you as the audit progresses.

These fees are based on the amount of time it takes to complete the deliverables, which are attached, as well as any out of pocket expenses for our company. The total cost of the audit will be $115,000, and you will be notified immediately if there are any discrepancies or any issues that may arise that will significantly change this cost. If this letter is an accurate representation of your understanding, please sign the enclosed copy and return it to us. We appreciate this opportunity to serve you, and look forward to working with you.

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