Considerations before accepting an audit

Question 1

Auditor skills, resources and competence

Answer 1

• Auditor may not have the skills to perform the audit because they have no experience in the industry
• Audit staff may be overworked, therefore may miss errors and take short-cuts in auditing the client

Question 2

Previous audits

Answer 2

1. Company should have communicated with the previous auditors to determine if there are any reasons why we shouldn’t accept the audit
2. Client asked us not to contact the previous auditors, therefore management integrity may be brought into question

Question 3

Engagement letter

Answer 3

The terms of the engagement should be discussed and agreed with the client before the engagement is approved
- Letter should be signed by both parites.

Question 4

Management integrity and business risks

Answer 4

• Access to info?
• Accounting staff have the relevant knowledge to compile the AFS?

Question 5

Clients ability to pay the audit fee

Answer 5

• ABC has been performing well, therefore, it seems like they will be able to pay
• Increased competition may impact the full payment of the audit fee
• Prior audiors?

Question 6

Threats? (FISSIP)

Answer 6

1. Independence threat
2. Self-interest threat
3. Self- review threat (objectivity)
4. Professional competence and due care (Staff required to work faster)
5. Familiarity threat
6. Intimidation threat (Money received)