Hanover Insurance



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[Date]

Hanover Model Engagement Letter for a Compilation Agreement

[Client Name/Representative]

[Client Address]

Dear [Client Name]:

[Firm Name] hereby agrees to provide you with the professional services described below. The following confirms the terms and objectives of our engagement and the nature and limitations of the services that

[Firm Name] will provide to [Client Name].

SERVICES TO BE PROVIDED

We will perform a compilation from information you provide [identify and describe work product] of the

Company as of [period(s) or year-end(s)] and issue an accountants’ compilation report thereon in accordance with the standards issued by the AICPA. We will conduct the compilation engagement in accordance with

Statements on Standards for Accounting and Review Services (SSARSs) issued by the AICPA. If, for any reason, we are unable to complete our compilation of your financial statements, we will not issue a report on such statements as a result of this engagement.

The objective of a compilation engagement is to assist you in presenting financial information in the form of [specify work product]. We will utilize your management financial data, that are your representations, without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the [work product] in order to ensure it is in conformity with [applicable financial reporting framework]. We have no responsibility to identify and communicate significant deficiencies or material weaknesses in your internal controls as part of this engagement.

[If applicable] In addition, we will provide the Company with the following non-attest services:

1. Assist you in adjusting the account balances in order to develop a trial balance from which the financial statements can be compiled.

2. Prepare the financial statements based on information in the trial balance and other relevant information that is provided by, and is the responsibility of, management.

3. Assist you in preparing the income tax provision, presentation, and disclosure of income taxes in the Company’s financial statements for the year ending [date].

Our professional standards require that we remain independent with respect to our attest clients, including those situations when we also provide non-attest services such as those identified above. As a result, you accept the responsibilities set forth below related to our performance of non-attest services as part of this engagement:

• Assume all management responsibilities.

• Oversee the services by designating an individual, preferably within senior management, who possesses suitable skill, knowledge, and/or experience.

• Evaluate the adequacy and results of the services performed.

• Accept responsibility for the results of the services.

It is our understanding that [name and title], who understands the services to be performed sufficiently to satisfy management’s responsibilities for oversight related to the non-attest service(s), has been designated by the Company to oversee the non-attest services. If any issues or concerns in this area arise during the course of our engagement, we will discuss them with you prior to continuing with the engagement. We may advise you about appropriate accounting principles and their application, but you are responsible for the financial statements.

[If applicable] [Firm Name] is not independent with respect to the Company. We will disclose that we are not independent in our compilation report.

[If applicable] The financial statements will not be accompanied by a report and are for management’s use only and are not to be used by a third party.

[If applicable] Management has elected to omit substantially all of the disclosures required by accounting principles generally accepted in the United States of America. If the omitted disclosures are included in the financial statements, they might influence the user’s conclusions about the Company’s financial position, results of operations, and cash flows. Accordingly, the financial statements will not be designed for those who are not informed about such matters.

[Partner name] is responsible for supervising the engagement and authorizing the signing of our report.

LIMITATIONS OF THE COMPILATION

A compilation differs significantly from and is substantially less in scope than a review or an audit of financial information, the objective of which is the expression of an opinion regarding the financial statements as a whole. A compilation does not contemplate performing inquiry, analytical procedures, or other procedures performed in a review or audit. Additionally, a compilation does not contemplate: (1) obtaining an understanding of the Company’s internal control; (2) assessing fraud risk; (3) testing accounting records by obtaining sufficient appropriate audit evidence through inspection, observation, confirmation, the examination of source documents (for example, cancelled checks or bank images); or (4) other procedures ordinarily performed in an audit. Accordingly, we will not express an opinion or provide any assurance regarding the financial information being compiled.

Our engagement cannot be relied upon to disclose errors, fraud, or noncompliance with laws and regulations that may exist. However, we will inform the appropriate level of management of any material errors and of any evidence or information that comes to our attention during the performance of our compilation procedures that fraud may have occurred. In addition, we will report to you any evidence or information that comes to our attention during the performance of our compilation procedures regarding noncompliance with laws and regulations that may have occurred, unless they are clearly inconsequential.

MANAGEMENT RESPONSIBILITIES

You are responsible for the following:

• The preparation and fair presentation of the [work product] in accordance with [specify applicable financial reporting framework].

• Designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the [specify applicable work product].

• Preventing and detecting fraud.

• Identifying and ensuring that the Company complies with applicable laws and regulations.

• Making all financial records and related information available to us.

In addition, your responsibilities include the establishment and maintenance of adequate records and effective internal controls over financial reporting, the selection and application of accounting principles, and the safeguarding of assets. You are also responsible for the accuracy and completeness of the financial information. Finally, you are obligated to provide us with information that significantly affects any material transactions, and that information will be accurate to the best of your knowledge and belief.

FEES

We estimate that our fees for the compilation services will be $________. You will also be billed for out-of- pocket costs such as postage, travel, etc. This fee estimate is based on anticipated cooperation from, and availability of, your personnel, the expectation that the Company’s records will be in good condition, and the assumption that unexpected circumstances will not be encountered during the compilation. If we believe that significant additional time is likely to be necessary in order to complete our compilation procedures, we will attempt to discuss it with you and arrive at a new fee estimate before we incur significant additional fees or costs.

ADDITIONAL SERVICES

If you request us to perform additional services not contemplated or described in this engagement letter, we will provide you with a separate agreement describing those additional services and related fees. However, unless otherwise stated in that separate agreement, the terms of this engagement letter shall also apply to the additional services and fees described in that separate agreement.

DISPUTE RESOLUTION

This agreement shall be governed by the laws of the State of _______. If a dispute arises out of the engagement described herein and if the dispute cannot be settled through negotiations, the parties agree first to try in good faith to settle the dispute by mediation using an agreed upon mediator. If mediation is unsuccessful and either party resorts to litigation, the claims must be asserted in court within one year of the date of the service at issue and be brought in the [Identify County State Court] which will have exclusive jurisdiction over the dispute.

If the above terms are acceptable to the Company and the services outlined are in accordance with your understanding, then please sign the enclosed copy of this letter in the space provided and return it to us.

Very truly yours,

[Accountant Name]

APPROVED:

[Client Name]

[Date]

The information provided in this document is intended for use as a guideline and is not intended as, nor does it constitute, legal or professional advice. Neither The Hanover Insurance Company or its affiliates and subsidiaries (“The Hanover”) shall be liable in tort or in contract to anyone who has access to or uses this information. The Hanover does not warrant that adherence to, or compliance with, any recommendations or guidelines discussed within this document will result in a particular outcome. This material does not amend, or otherwise affect, the provisions or coverages of any Hanover insurance policy or is it a representation that coverage does or does not exist for any particular claim or loss under any such policy.

© 2015 The Hanover Insurance Group, Inc.

119-0467 (2/15)

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