ch2 obtaining an engagement

Question 1

What are the 2 methods of obtaining an engagement?

Answer 1

• Tender
• Advertising

Question 2

what sources of information related to the client are needed?

Answer 2

Client- financial statements, internal audit report, management accounts
External- internet research, banks/solicitors, credit ratings
Auditor- previous auditor

Question 3

why do prospective auditors contact previous auditors?

Answer 3

to see if there is anything that would prevent them from accepting nomination

Question 4

if client doesnt give consent to contact previous auditor, what should the prospective auditor do?

Answer 4

decline the appointment

Question 5

what is client due diligence

Answer 5

obtaining correct identification before appointment

Question 6

how long must client identification be kept for

Answer 6

a minimum of 5 years and until 5 years have elapsed since the relationship with the client has ceased

Question 7

when are audit engagement letters issued

Answer 7

after the auditors have accepted nomination

Question 8

what is the purpose of the engagement letter

Answer 8

• define the extent of the firms and managements responsibilities
  -minimise potential for misunderstanding between client and firm
• provide written confirmation of:
  -firms acceptance of appointment
  -the scope of the engagement
  -the form of reports to be issued