2.1 - Appointment Considerations Flashcards
Before a new audit client is accepted, what must auditors determine?
Whether there are any independence or ethical issues likely to cause significant problems with the ethical code
What are the four acceptance procedures?
- ensure professionally qualified
- ensure existing resources adequate
- obtain references
- communicate with existing/predecessor auditors
Ensure professionally qualified
Consider whether disqualification on legal or ethical grounds, e.g if there would be a conflict of interest
Ensure existing resources adequate
Consider available time, staff and technical expertise
Obtain references
Make independent enquiries if directors are not personally known
Communicate with existing/predecessor auditors
Enquire whether there are reasons/circumstances behind the change which the new auditors ought to know, also as a matter of courtesy
What does the Code of Ethics say to do if the previous auditor that has been contacted does not reply?
The auditor must still take other reasonable steps to obtain information about possible threats and write (By recorded delivery) of their intention to accept the engagement within a specific time period
Once the steps have been taken (regarding no reply from the previous auditor) what can one presume?
The proposed accountant is entitled to assume that the existing accountant’s silence implies that there was no adverse comment to be made (ICAEW Code of Ethics)
What can a client do that makes them suspicious?
Refuses to grant the existing or predecessor audit to communicate with the proposed auditor
What is the first basic factor for consideration?
The integrity of those managing a company will be of great importance, particularly if the company is controlled by one or a few dominant personalities
What is the second basic factor for consideration?
Consider whether the client is likely to be high or low risk to the firm in terms of being able to draw an appropriate assurance conclusion in relation to that client
