Module 14 - Audit Process: Engagement And Client Management Flashcards
Do engagement and client management procedures have to be performed throughout the audit process?
Yes
Key elements of engagement and client management include:
Firm / engagement staff management procedures
Working paper management
Communication with those charge with governance
What does the engagement letter act as?
The contract of the engagement
ISA (UK) 2010 highlights a number of elements that must be included in the engagement letter, including:
Objective and scope of the audit of the financial statements
Responsibilities of the auditor
Responsibilities of management
Identification of the applicable financial reporting framework for the preparation of financial statements
Reference to expected form and content of any reports
Mnemonic for typical contents of the Audit Strategy Memorandum (ASM)
B SSMART
Background client info
Systems and controls information
Staffing and key client contacts
Materiality
Analytical procedures results
Risk assessment findings and procedures planned in response
Timetable
At the audit planning meeting, the audit team must discuss what at the entity?
The ROMM
What does the management letter allow the auditor to communicate?
Any significant weaknesses identified in the clients internal control systems
As well as any other significant matters such as misstatements or disagreements between the auditor and management
Who is the management letter commonly addressed to?
The board
What must be involved for listed companies to ensure that a quality control review is carried out?
An engagement quality control review (EQCR)
Key control standards that provide guidance to the auditor are:
ISQC (UK) 1 - quality control for firms that provide audits
ISA (UK) 220 - quality control for an audit
ISA (UK) 230 - audit documentation
What does ISQC (UK) 1 require from audit firms?
Adequate recruitment, performance evaluation and training procedures - making certain staff are committed to ethical principles and have the capabilities and competence necessary
Is documentation of all audit work and all material matters of judgement during the audit vital?
Yes
The purpose of reviewing working papers is to ensure that:
Sufficient, appropriate evidence has been gathered to support the audit report
Judgements and conclusions drawn are appropriate
The requirements of the auditing standards and company law have been fulfilled
An auditors working papers must include:
Who performed the audit work and date completed
Who reviewed the audit work and the date and extent of such review
ISA (UK) 230 sets out documentation standards, what is the general idea?
If an experienced auditor unconnected with the audit team were to read the file - they should be able to understand everything
