A3 (1) - ENGAGEMENT ACCEPTANCE AND UNDERSTANDING THE ASSIGNMENT

Question 1

I. APPOINTMENT OF THE AUDITOR

Answer 1

1- The audit committee is selecting for external auditor,

2- The audit committee must pre-approve all services under Sarbanes-Oxley Act

3-Auditor may accept engagement near or after year end

4- Determine the Nature and Scope of the Engagement with the audit committee and management .

Question 2

II. FIRM CLIENT ACCEPTANCE AND CONTINUANCE POLICIES

Answer 2

A. Firm’s Ability to Meet Reporting Deadlines
B. Firm’s Ability to Staff the Engagement
C. Independence
D. Integrity of Client Management

Question 3

III. ASSESS THE AUDITABILITY OF THE CLIENT

Answer 3

A. Availability and Adequacy of Accounting Records

B. Management’s Internal Control Environment

Question 4

IV. COMMUNICATE WITH THE PREDECESSOR AUDITOR - Before Acceptance

Answer 4

1 - Information on management integrity
2- Disagreements with management
3- The reasons for the change of auditors
4- Communication regarding fraud, illegal acts if any

Question 5

IV. COMMUNICATE WITH THE PREDECESSOR AUDITOR - After Acceptance

Answer 5

1-Inquiries affect the conduct of the audit (audit problems)

2- Review documentation related to significant issues

Question 6

IV. COMMUNICATE WITH THE PREDECESSOR AUDITOR - Discovery of Problems

Answer 6

1- Meeting involving both auditors and the client

2- if refused consider the implications on the
current audit and whether to resign

Question 7

V. ENGAGEMENT LETTER - Reasons for Understanding

Answer 7

1- ENGAGEMENT LETTER MANDATORY

2- Reduce misunderstanding and confusion

Question 8

V. ESTABLISHING AN UNDERSTANDING WITH THE CLIENT - Contents

Answer 8

1. Objectives of the Engagement
2- Management's Responsibilities
3- Auditor's Responsibilities
4- Limitations of the Engagement
5- Other Matters