Factors that an auditor should consider before accepting appointment of a new client
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Accepting audit engagementsPreconditions for an auditAuditors should only accept a new audit engagement, or continue an existing audit engagement if the 'preconditions for an audit' required by ISA 210 Agreeing the terms of audit engagements are present. ISA 210 requires the auditor to:
If the preconditions for an audit are not present, the auditor should discuss the matter with management, and should not accept the engagement unless required to do so by law or regulation. ProceduresIf offered an audit role, the auditor should:
Engagement lettersThe engagement letter will be sent before the audit. It specifies the nature of the contract between the audit firm and the client and minimises the risk of any misunderstanding of the auditor's role. It should be reviewed every year to ensure that it is up to date but does not need to be reissued every year unless there are changes to the terms of the engagement. The auditor must issue a new engagement letter if the scope or context of the assignment changes after initial appointment. ISA 210 requires the auditor to consider whether there is a need to remind the entity of the existing terms of the audit engagement for recurring audits and many firms choose to send a new letter every year, to emphasise its importance to clients. The contents of the engagement letterThe contents of a letter of engagement for audit services are listed in ISA 210 Agreeing the Terms of Audit Engagements. They should include the following:
In addition to the above the engagement letter may also make reference to:
What factors should an auditor consider before accepting a company as an audit client?Points to consider before accepting the Audit. Background information.. Eligibility.. Management assessment.. Investigation of industry involvement and risk factor.. What precautions must an auditing firm take before accepting a new client?Accepting new audit clients
' This means that when approached to take on a new client, the firm should investigate the potential client, its owners and business activities in order to evaluate whether there are any questions over the integrity of the potential client which create unacceptable risk.
What are the factors that auditors should consider before an accepting assurance engagement?They should include the following:. The objective and scope of the audit;. The responsibilities of the auditor;. The responsibilities of management;. The identification of an applicable financial reporting framework; and.. Reference to the expected form and content of any reports to be issued.. What factors should an auditor consider prior to accepting an engagement explain why auditors need an understanding of the client's industry?What factors should an auditor consider prior to accepting an engagement? The auditor should investigate the client, the clients standing in the business community, financial stability, and relations with its previous CPA firm. You want to assess integrity of the client to avoid fraud.
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