What are the factors to be considered whether to accept or reject an audit engagement?
Your audit firm has been appointed to conduct a full scope of the financial statements covering a period of three months of Clever Audit Limited. Clever Limited needs the audit report for obtaining a bank loan. While verifying certain account heads you identify certain problems for which you are not provided satisfactory replies by the client. At the same time Clever limited approaches you to change the scope of the assignment from a full scope audit to a review assignment. They give you the reason that they have misunderstood the scope of assignment earlier. What course of action would you adopt in this situation? Show
A request from the client for the auditor to change the engagement may result from a change in circumstances affecting the need for the service, a misunderstanding as to the nature of an audit or related services originally requested or a restriction on the scope of the engagement, whether imposed by the management or caused by the circumstances. A change in circumstances that affects the entity’s requirements or misunderstanding concerning nature of service originally requested would ordinarily be considered as reasonable basis for requesting a change in the engagement. However, a change would not be considered reasonable if it appeared that the change relates to information that is incorrect, incomplete or otherwise unsatisfactory. The auditor should also consider legal or contractual implications of the change. In view of above, it would not be appropriate to accept the change in the assignment as the reason for change seems to be lack of availability of audit evidences. Under what circumstances the auditor should not accept an audit engagement? Audit engagement should not be accepted under following circumstances:
Enumerate some contents of the audit engagement letter
List down the factors that are normally considered by an auditor before accepting a new audit? The auditor should consider that preconditions for the audit are present. Such matters include:
Is it necessary for an audit firm to issue engagement letter every year in case of recurring audit? What are the factors to be considered in this regard? Following factors are to be considered in sending engagement letter each year:
You have been offered to audit an entity where management has not made any decision regarding the applicable financial reporting framework. Explain the importance of financial reporting framework at the client acceptance level. Appropriate financial reporting framework is important because without such criteria management does not have an appropriate basis for preparation of financial statements and the auditor does not have a basis for forming an opinion. The auditor of a parent company is also the auditor of its subsidiary. List the factors that the auditor should take into account while deciding whether a separate engagement letter should be sent to the subsidiary. When the auditor of a parent entity is also the auditor of its subsidiary, the factors that influence the decision whether to send a separate engagement letter to the subsidiary include the following:
Your firm has been the auditor of Mujahid Limited (ML) for many years. Before the commencement of the current year’s audit ML has requested that some changes be made in the terms of engagement. Required (i) What are the circumstances which may lead to changes in the terms of engagement? (ii) Discuss the important points which should be considered before accepting the changes in the terms of engagement.
What factors should be considered before accepting an audit engagement?Points to consider before accepting the Audit. Background information.. Eligibility.. Management assessment.. Investigation of industry involvement and risk factor.. 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.
Which is the 4 steps in accepting an audit engagement?Each audit engagement is unique, but most share the basic steps of preparation, planning, field testing, and audit procedures, as well as subsequently rendering the audit opinion.
What are the major factors that should be considered before accepting the client?Factors Affecting Acceptance and Continuance of Client Relationships and Review Engagements.. Preconditions for Accepting a Review Engagement.. Additional Considerations When the Wording of the Practitioner's Report Is Prescribed by Law or Regulation.. Agreeing the Terms of Engagement.. Recurring Engagements.. |