3 Flashcards
What’s in a tender, and EU legislation?
37
4 acceptance matters to consider?
- are we professionally qualified to act (are there are legal or ethical issues stopping us?)
- have we spoken to the existing or previous auditors?
40
- do we have adequate resources available (ie. staffing)?
- have we done our due diligence (Money Laundering Regs 2007)?
- have we assessed management integrity?
- have we assessed risk?
What info do we need to gather on a client before accepting an engagement?
Client
- financial statements
- internal audit reports
- management accounts
External
- credit ratings
- bankers, solicitors
- laws and regulations
- internet search
Auditor
- previous auditor
What are the critical yes/no points on the appointment decision chart?
If it’s the org’s first audit - YES
If the org doesn’t give permission to contact old auditor - NO
If the auditor does not give old auditor permission to reply - NO
If the auditor does not reply - chase, and if still no reply, decide on appointment based on available info!
What is client due diligence, and how does it differ for individuals and companies?
To comply with Money Laundering Regulations 2007, correct identification needs to be obtained before appointment.
Individuals
- photo ID and other documents confirming name and address
Companies
- ID from companies house
Client ID must be kept for a minimum of 5 years, and until 5 years have elapsed since the relationship with the client has ceased
3 broad procedures after accepting an engagement?
- Ensure outgoing auditor’s removal/resignation has been properly conducted
- Ensure new auditors’ appointment is valid
- Prepare and submit a letter of engagement to the directors of the company (done just after the auditors have accepted nomination)
What are the purpose and practicalities of the engagement letter.
45
- Define the extent of firm’s and management’s responsibilities
- Minimise potential for misunderstanding between client and firm
- Provide written confirmation of:
- the firm’s acceptance of appointment
- the scope of the engagement
- the form of reports to be issued
Send to all clients
Send as soon as possible after appointment
What are the total contents of an engagement letter (as per ISA 210)?
MUST include:
- objectives of work/auditor’s responsibilities
- management’s responsibilities
- scope of work
- form of any reports
- auditor’s right to access to books and records
- reporting framework
May include:
- timetable
- expectations re: written management representations
- confidentiality/restricted circulation/use of report
- arrangements re: reliance on internal audit
- restrictions on auditor’s liability
- basis of fee calculations
What are the fee determinants, and what is lowballing?
39
Purposes of risk analysis?
41
How to consider ethical requirements?
42
Acceptance matter: resources?
43
Acceptance: CA2006 considerations?
43
The preconditions for an audit?
44
Process for removal of an auditor?
47
Process for resignation of an auditor?
49
