Obtaining an engagement Flashcards
What must an auditor do before accepting a new client?
Check there are no independence or other ethical issues, make sure the appointment was in a professional, legal manner
What acceptance procedures must be carried out?
Ensure professionally qualified to act - disqualified on legal/ethical grounds
Ensure adequate existing resources - time, staff, technical expertise
Obtain references - independent enquiries
Professional clearance - find reasons for change in auditor
Integrity of management - management can mislead
Factors for a high risk client
Past fraud
Refusal of communication with present auditors
Weak internal controls
Volatile industry
Attractive assets
When should an appointment be declined?
If they refuse permission to speak with the old auditors
What procedures should be carried out after acceptance?
Ensure outgoing auditor’s removal/resignation properly conducted
Ensure new auditor’s appointment valid
Submit letter of engagement
Do money laundering checks
What is client due diligence?
Checking the identity of clients when an ongoing relationship is envisaged or where a transaction > 15000 will take place
What ID checks are done and how long should this be kept?
Individuals: photograph, full name, permanent address, passport/utility bill
Companies: certificate of incorporation, registered address, conformation statement, previous FS
All kept for 5 years after relationship ended
What must be included in the engagement letter?
Objective of the audit
Scope of the audit
Auditor’s responsibility
Reporting framework
Management’s responsibility to provide unrestricted access
Conformation of output and reports
What could be included in the engagement letter if relevant?
Planning
Written confirmation of representations
Fees
Involvement of other experts
Internal auditors
Restriction of liability
