Chapter 6 - Tendering

Question 1

Audit firm may step down because:

Answer 1

Independence issues

Doubts over integrity of management

Strategic decision making i.e. concentrating on other markets

Question 2

Tendering is

Answer 2

Process of quoting a fee for work before work carried out

Question 3

When invited to tender

Answer 3

Firm should consider ethical, legal and commercial issues

Question 4

Risks of tendering are

Answer 4

Wasted time

Setting uncommercially low fee to win contract

Making unrealistic claims or promise to win contact

Question 5

Engagement proposal document should outline

Answer 5

What client expects from auditors

What timetable does client expect

What date audited financial statements are required

What company’/a future plans are

Any perceived problem with potential clients current auditors

And contain:

Fee and calculation

Nature, purpose and legal requirements of audit

Assessment of client requirements

Outline of how firm will satisfy requirements

Question 6

Why change auditor?

Answer 6

Change in relationship between auditor and client

Attempt to reduce costs

Dispute between company and incumbent firm over accounting practices

Company may seem a firm that provides a greater range of services

Audit firm may have ceased trading