Chapter 6 Flashcards
How an assurance firm obtains an engagement by following methods?
being approached by potential client and being asked to accept engagement
being approached by existing client and being asked to accept the engagement
being approached by potential or existing. Lent and asking to tender for engagement
What is the process for tendering for an engagement?
Several assurance firms are in effect asked to bid for an engagement, by setting out attributes their firm possesses that make them best placed to carry out engagement and sometimes very importantly indicating level of fee they’re likely to charge
What should determine the fees?
Seniority and professional experience of persons necessarily engaged on the work
time expended by each
degree of risk and responsibility which work entails
nature of clients business, the complicity of its operations and work to be performed
priority and importance of work to client
together with any expenses properly incurred
What should auditors consider when accepting an engagement
Results of risk analysis
whether there’s any ethical issues which prevent acceptance
whether girl has sufficient experience and resources to undertake the engagement
whether all legal requirements associated with appointment of incoming auditors and removal of resignation of outgoing auditors have been met
What is the AGM?
Annual General Meeting
main purpose to copy with legal requirements and appointment of auditors of new accounting term
What is a statement of circumstance?
when external auditor ceased to hold office required to depositt this
What should an engagement letter include?
Objective and scope of audit
management repsonsibilites
what are auditors responsibilities
form and content of reports and communications that arise
Fact due to test nature and other limitations of audit, unavoidable risk some material misstatement may remain undiscovered
Fact auditors entitled to unrestricted access to records, documents and other information requested in connection with audit
–>management provide written representations
If there is a recurring audit what would indicate a new letter is required?
indications that client misunderstands terms of engagement
revised or special terms of engagement
recent change in senior management or directors
significant change in ownership of company
significant change in nature of size of company
legal or regulatory requirements
change in financial reporting framework adopted in preparation of financial statements
change in other reporting requirements
