Client Acceptance

Question 1

Client acceptance

Answer 1

• the first stage of the audit under risk assessment
• accept new client
• continue with existing client

Question 2

Considerations when deciding to accept/continue

Answer 2

• client integrity (reasonable = accept, questionable = do not accept)
• audit team has capabilities (time and resources)
• audit team meets ethical requirements (external)
• assess clients previous audits (any previous issues?)

Question 3

Factors to consider to assess integrity

Answer 3

• reputation (of business and key stakeholders)
• attitude towards risk and how its handled
• co-operation
• collectability of fees
• why did they switch audit firms (if applicable)

Question 4

How to assess integrity

Answer 4

• communicate with previous auditor
• communicate with lawyers and creditors
• perform background check
• obtain prior FS

Question 5

Criteria to accept new engagement

Answer 5

• is the framework appropriate
• are there any independence issues
• can engagement risk be mitigated
• does the auditor understand user requirements
• is there industry legislation that impacts financial reporting
• has management agreed in writing
• is there any scope limitations

Question 6

Reasons to not accept audit

Answer 6

• management does not agree to responsibilities in writing
• financial reporting framework not appropriate

Question 7

What does the EL include?

Answer 7

• objective/scope of the audit
• responsibilities of auditor/management
• identify FR framework
• basis of fees