CH # 02 Obtaining an engagement

Question 1

What are preconditions for audit?

Answer 1

PA

Premise agreed by management
AFRF is used by management is acceptable

Question 2

How auditor establishes whether preconditions for audit are present/exist?

Answer 2

PF AIR

Financial reporting framework is acceptable

auditor shall obtain AGREEMENT from management
Preparation of F/S
Internal controls are free from material misstatement
Relevant information provide to the auditor

Question 3

Auditor’s response or course of action if any of preconditions for audit is not present?

Answer 3

PM

What are preconditions?
Preconditions are required to comply with ISA’s
Preconditions are necessary to avoid MISUNDERSTANDING

Question 4

Contents of engagement letter

Answer 4

FOR^3 & ROSE WIFI APP

Objective and scope of audit
identification of applicable FINANCIAL reporting framework
Responsibilities of auditor
Responsibilities of management
Reports to be issued by auditor

Reference to any other communication as a result of audit engagement
Obligation to provide audit working papers to other parties
Significant matters
Elaboration

Written representation
Internal auditor
Fee
Inherent limitation

Agreements b/w auditor and entity
Planning
Performance

Question 5

Circumstances leading to change in terms of audit engagement

Answer 5

SMC

Scope of audit
Misunderstanding
Circumstances

Question 6

If change is reasonable and auditor accepts the change

Answer 6

PRA

Procedures
Refer
Agreed

Question 7

Engagement letter on recurring audits

Answer 7

MOM & FR To BR

Misunderstanding
Ownership
Management

Financial reporting
Reporting

Terms of Engagement

Business size increased
Regulatory