5.Acceptance and Continuance Procedures Flashcards
What are preliminary engagement activities?
These are the activities that are performed by an auditor at the start of each audit engagement. These include:
Performing acceptance and continuance procedures
Agreeing the terms of engagement.
What are the factors to be considered before accepting the terms of engagement?
Auditor should perform acceptance and continuance procedures before start of audit. This includes determining:
Whether audit firm has sufficient staff, technical competence, necessary time and resources to perform engagement.
Integrity of owners. directors and management of client.
Whether firm and engagement team can comply with legal and ethical requirements
Also the significant matters that arose during the previous engagement.
What should the auditor do after he accepts the client?
Auditor should communicate his consent to the client before AGM.
He should ensure that the removal of predecessor auditor and appointment of this new one is in accordance with legal requirements.
Auditor should prepare and submit engagement letter to the client.
What should the auditor do if its a recurring audit?
He should review the acceptance decisions.
What are the safeguards for “threats to professional competence and due care due to lack of information”?
Obtain permission of the client and the proposed accountant should notify existing chartered accountant of the proposed work.
The existing accountant should provide any relevant information needed for proper conduct of work.
One copy of opinion is sent to the existing accountant.
What is the purpose of Professional Clearance Letter?
Every incoming auditor, as part of acceptance procedures, writes a Professional clearance letter to the predecessor auditor to: identify any matters relevant to acceptance decision. For example: any disagreement, integrity of management, fees, etc.
What are the procedures to be followed by Incoming auditor?
The incoming auditor should obtain a written permission from client to contact with the predecessor auditor. If the client does not give permission, this will be a scope limitation. The auditor should not accept the engagement.
If the predecessor auditor does not respond, proposed auditor shall try to obtain relevant information from other sources.
If response from the predecessor auditor indicates some issues affecting acceptance decision, incoming auditor may still accept the engagement after applying necessary safeguards.
What are the procedures to be followed by Outgoing auditor?
Auditor shall comply with legal and ethical requirements relating to such communication and disclosure.
Obtain written permission from the client to reply to incoming auditor.
If the client does not allow, inform the proposed auditor about non-permission. This will be scope limitation before acceptance. Incoming auditor shall not accept the engagement.
If the permission is given, write asap to proposed auditor stating the facts honestly.
