Chapter 5

Question 1

What are preliminary engagement activities?

Answer 1

1: Performing acceptance and continuance procedures.
2: Agreeing the terms of audit engagement.

Question 2

What are the factors to be considered before acceptance?

Answer 2

1: Whether audit firm has sufficient staff , technical competence , necessary time and resources to perform the engagement.
2: Integrity of owners , directors and management of client.
3: Whether firm and engagement team can comply with legal and ethical requirements.
4: Auditor also considers significant matters arose during previous engagements.

Question 3

Threat to professional competence and due care may be created.

Answer 3

1: Agree realistic timeframe for performance of engagement
2: Assign sufficient staff with necessary skills.
3: Using experts where necessary.

Question 4

Threat to integrity or professional behaviour may be created if client is invloved in illegal activities or questionable financial reporting practices.

Answer 4

1: Send professional clearance letter to predecessor auditor .
2: Obtain information from other sources.