What is the purpose of the acceptance and continuance of client relationships and specific engagements?
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Steps before the acceptance of an audit client Client Acceptance or Continuance– Need to Know when to say no or yes. Asking the right questions from the client while considering new clients or continuance of existing clients, is a key first step for establishing a quality audit and relationship between the auditor and client.  Outgoing Auditor, Professional Etiquette LetterThe auditor should communicate with the outgoing auditor, and the client to assess if there are any ethical or professional reasons why they should not continue the appointment. They should obtain permission from the client’s management to contact the outgoing auditor, if the client denies the permission, then the engagement should be refused. The previous auditor must obtain permission from the client’s management to respond to the new auditor. if not given, then the auditor should refuse the engagement. 2. Reputation and integrity of the client’s management assessed- If necessary, the firm may want to obtain references if they do not formally know the directors
3. Consider the level of risk attached to the audit and whether this is acceptable to the firm. As part of this, they should consider whether the expected audit fee is adequate in relation to the risk of auditing the client screening The purpose of client screening procedures is to determine whether the prospective client is suitable for the audit firm or not. The firm needs to evaluate the potential risk to the firm of acceptance. When a client is considered to represent a high audit risk to the firm, the firm should carefully consider the implications arising should it fail in meeting its objective of giving an honest audit opinion. If the firm is not confident that the benefit to be obtained from accepting the appointment outweighs the potential risks (including the financial and repetitional risk of being sued), then the firm should decline the appointment. Factors to consider: – The state of the economic sector in which the client operates (a depressed sector may indicate risk). The experience and qualifications of the company’s management and their attitude towards controls. – The current operating and financial situation of the company. – Directors’ understanding of External Auditor’s role and their own responsibilities– The accounting policies used– Evidence of client involvement in fraudulent or illegal activities. – Management permission or refusal to allow auditors to examine significant documents, such as the minutes of directors’ meetings. 1. Any issues which might arise could threaten compliance with ACCA’s Code of Ethics and Conduct or any local law, including independence and conflict of interest with existing clients. If issues come, then their significance must be considered. 2. Whether they are competent to perform the work and whether they would have appropriate resources (especially human resources and time!) available, as well as any special skills or knowledge required for the audit Read More: Threats to auditor’s independence Find us on Facebook Why is a client acceptance and continuance important?Procedures can be adopted to help reduce the risk of accepting another firm's problem client. It is equally important that existing clients, and new engagements from existing clients, are monitored to ensure they continue to satisfy the firm's acceptance requirements, including conflict of interest requirements.
What is a purpose of the acceptance and continuance of client relationships?What is the primary purpose of the acceptance and continuance of client relationships and specific engagements element of quality control? Provide reasonable assurance that firms do not associate with clients whose management lacks integrity.
What are the factors acceptance and continuance of client relationships and review engagements?Under the element of “Acceptance and Continuance of Client Relationships and Specific Engagements”, there are three major components – Competency of the Firm, Compliance with Ethical Requirements, and Integrity of the Client.
What's the importance of engagement proposal to new client and continuing client?The importance of engagement letters
Engagement letters define the business contract between a professional firm and its clients. It outlines the fee structure, responsibilities and obligations of the firm and the client. Without it, each party can be in legal limbo.
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