CHAP 2: OBTAINING AN ENGAGEMENT Flashcards
what accountant do when tender for an audit
offer a quote for service, outlining the benefit of their firrm and personnel
2 considerations trước khi auditor nhận 1 khách hàng mới
1, whether any independence or other ethical issues to cause significant problem with ethic code
2, Liệu auditor have been appointed in a proper and legal manner
Key factor để evaluating ethical threat
whether it will be possible to contact the existing/predecessor accountant, in order to ask whether there are any reasons why the engagement should not be accepted
Acceptance procedure mà proposed auditor must carry out
1,Ensure professionally qualified to act (Consider whether disqualified on legal or ethical grounds, for example if there would be a conflict of interest with another client)
2,Ensure existing resources adequate Consider available time, staff and technical expertise.
3,Obtain references
Make independent enquiries if directors not personally known.
4,Communicate with existing/predecessor auditors
Enquire whether there are reasons/circumstances behind the change which the new auditors ought to know, also as a matter of courtesy.
When communicating with predecessor audit, if no reply is receive, auditor phải làm j
Auditor must still take other reasonable steps to obtain information about possible threats. They must also write to the existing accountant, by recorded delivery, stating their intention to accept
the engagement in the absence of a reply within a specific time period
Once these steps have been taken, then “the proposed accountant is entitled to assume that the existing accountant’s silence implies there was no adverse comment to be made” , they can still accept the engagement, as long as the other steps that they have taken satisfy them that any ethical threats are acceptable.
When the client refuse to grant existing communicate with proposed auditor, cả client và proposed auditor phải làm j
Client should disclose this fact to the proposed auditor. The proposed auditor will then need to carefully consider whether to accept the audit.
2 basic factor auditor phải consideration
The integrity of those managing a company will be of great importance,
particularly if the company is controlled by one or a few dominant
personalities.
The audit firm will also consider whether the client is likely to be high or
low risk to the firm in terms of being able to draw an appropriate assurance
conclusion in relation to that client.
Ví dụ về low risk
Good long-term prospects
Well-financed
Strong internal controls
Conservative, prudent accounting policies
Competent, honest management
Few unusual transactions
Ví dụ về high risk
Poor recent or forecast performance
Likely lack of finance
Significant control weaknesses
Evidence of questionable integrity, doubtful accounting policies
Lack of finance director
Significant unexplained transactions or transactions with connected companies
Nếu risk level của 1 cuộc kiểm toán không phải là low risk, auditor và audit firm phải làm j
specific risks should be identified and documented.
assign specialists in response to these risks, particularly industry specialists, as
independent reviewers.
Some audit firms have procedures for closely monitoring audits( 1 số cty giám sát chặt chẽ quá trình kiểm toán của cuộc kiểm toán có rủi ro cao)
Expected fee của 1 cuộc kiểm toán thể hiện điều j
the expected fees from a new client should reflect the level of risk
expected
Audit firm phải làm j để đảm bảo conflict of interest k xảy ra
no existing clients will cause difficulties as competitors of the new client
Auditor nên lấy thông tin khách hàng từ đâu
1,Enquiries of other sources:Bankers, solicitors
2,Review of documents: most recent annual accounts, listing particulars, credit rating
3, Previous accountants/auditors: previous auditors should be invited to disclose fully all relevant information
4, Review of rules and standards: consider specific laws/standards that relate to industry
Appointment decision chart
Dở sách ra xem
3 procedures should be carried out after accepting nomination.
Ensure that the outgoing auditors’ removal or resignation has been properly
conducted in accordance with national legislation.
Ensure that the new auditors’ appointment is valid.
Set up and submit a letter of engagement to the directors of the company
Việc firm vẫn nợ fees previous auditor có ảnh hưởng đến việc appointment new auditor không
Không
Once a new appointment has taken place, the new auditors should obtain cái j
1, obtain all books and papers which belong to the client from the outgoing auditors.
The outgoing auditorsshould ensure that all such documents are transferred promptly, unless they have a lien
(a legal right to hold on to them) because of unpaid fees.
Các other assurance engagement( các dvu đảm bảo khác) thì các consideration có giống dvu audit không
The legal considerations relating to audit will not be relevant to other assurance
engagements, but the ethical, risk and practical considerations will be just as
valid
How assurance firm comply with Money Laundring regulation
1, Assurance firms must keep certain records about clients and undertake what is known as client due diligence.
2, Mandatory to check the identity of all clients before any work is undertaken
when an ongoing relationship is envisaged or where a one-off transaction or a
series of transactions greater than €10,000 will take place.
How to identify client
For individuals: obtaining official documents including a photograph and
identifying the client’s full name and permanent address, for example, a passport supported by a number of utilities bills or a driving licence.
For companies: obtaining similar legal information from the Registrar of
Companies; for example, a certificate of incorporation, the registered address and a
list of shareholders and directors.
Client identification document phải giữ bn lâu
must be kept for a minimum of five years and until five years have elapsed since the relationship with the client in question has ceased. It is also necessary to keep a full audit trail of all transactions with the client.
Client due diligence là j
thẩm định chi tiết 1 khách hàng để tránh các rủi ro trước khi nhận 1 khách hàng mới
Purpose of engagement letter
1, define clearly extent of firm responsibility, minimise misunderstanding between client và firm( giảm expectation gap)
2, provide writen confirmation of firm acceptance for the appointment, the scope of engagement và form of report
firm ở đây là audit firm
Định nghĩa audit engagement letter
A letter of engagement sets out the objectives, scope and responsibilities of
the audit. It outlines the reporting framework and the form of any reportsor opinions which may be given.
