Chapter 5 Flashcards
what are adverts for auditors not allowed to do
bring ACCA into disrepute
discredit the service of others
be misleading
fall short of any local requirements for advertising
why is it risky to mention a fee on an advert
an audit fee cannot be a single flat rate and therefore can be misleading
if an audit advert is going to mention a price, what should it mention
the basis on how fees are calculated ( hourly rate )
when does a firm put together a tender
when there has been an open invitation to tender or when they have been approached by a prospective client
6 things to consider when considering if you want the client
do we have enough resource
why do they want new auditors
what are the future plans of the entity
are specialist skills necessary
what do the client require from the audit
do we have suitable personnel
what must the tender proposal include (6)
fee and details of how its calculated
assessment of requirements of client
outline of how the firm is going to meet the requirements
assumptions made such as deadlines
proposed approach to engagement
outline of the firm and staff involved
5 common criteria’s clients might use to evaluate the tender
location
personal knowledge of staff / partner
matching the service offered to needs of the business
communication
development of relationship between auditor and client
what must be submitted by an audit firm when they cease to be an auditor of a listed company
a statement of circumstances
when does an auditor need to submut a statement of circumstances for a private company
if they are leaving before their term of office and it is not an exempt reason
what does the ACCA code of ethics and conduct state that fees should be
fair and reasonable
why is it expected that fees over time of an audit will decrease
time spent should reduce as client knowledge increases
clients systems and procedures should be fully documented in the first year which is time consuming but wont need to be done again
the first year of an audit is high risk but risk should fall
what is lowballing
the practice of setting the initial audit fee low in order to win the client
what does the ACCA code of ethics and conduct state about lowballing
a low fee is not improper as long as the client has not been misled and the audit quality has not been compromised
ethical implications of lowballing
the firm will need to keep the client for a long period ot recover losses so self interest threat
professional competence and due care may not be applied as the fee is so low
unprofessional as smaller firms cant compete
what are preconditions of an audit
managements acceptable financial reporting framework in the prep of FS and the agreement of management of how an audit is conducted
