preengagement planning

Question 1

Engagement letter

Answer 1

A. objective and scope of audit
B. auditors responsibilities
C. management responsibility
D. statement about inherent limitation of the audit
E. a statement identifying the applicable financial reporting framework
F. reference to the expected content of any reports to be issued
G. other matters as warranted in the auditors judgement

Question 2

initial audit

Answer 2

refers to when the prior year financial statement have been audited by a different auditor (predecessor auditor).

Question 3

before taking on new client, speak with predecessor auditor and ask these questions

5 matters that must be addressed before taking on new client.

Answer 3

Information that might bear on the integrity of management;

b. Any disagreements with management about accounting or auditing issues;
c. Communications involving those charged with governance with respect to fraud and/or noncompliance with applicable laws or regulations;
d. Communications involving management and those charged with governance regarding significant deficiencies in internal control; and
e. The predecessor’s understanding about the reasons for the entity’s change in auditors.

Question 4

there were 6 quality control procedures. which two apply to pre-engagement situations.

Answer 4

acceptance and continuance of clients and engagements

relevant ethical requirements (emphasis on independence)

Question 5

terms of engagement

to accept an audit from a new or existing client when

Answer 5

the preconditions for an audit are established

the auditor and management (and those charged with governance) have a common understanding of the terms of the engagement

Question 6

auditor responsibilities

Answer 6

is the reporting financial framework acceptable?

obtain managements agreement regarding responsibility for the
preparation of F/S
design and implementation, mainentanc of I.C
giving auditor full access to all relevant info