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AA > 2. Accepting Engagements > Flashcards

2. Accepting Engagements Flashcards

1
Q

Methods of obtaining an audit

A

Most common: Tender

(Could be direct request)

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2
Q

Tender: Some things presented in tender

A

(Reasons to pick them:)

Proposed fee
quality of service
knowledge of business/industry
proposed personnel

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3
Q

Audit fee: what can a firm charge?

A

Anything

But care taken against lowballing

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4
Q

Lowballing safeguard example

A

Engagement quality review

(And culture of integrity)

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5
Q

ICAEW code of ethics: Fee should be determined by

A
  1. Personell
  2. Time taken
  3. Degree of risk and responsibility needed
  4. Nature of client business (complexity)
  5. Importance of work to client
  6. Expenses to be incurred
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6
Q

Four main factors to discuss prior to accepting audit engagement

A
  1. Risk analysis
  2. Ethical considerations
  3. Resources available
  4. CA considerations
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7
Q

Audit acceptance considerations: Risk analysis: What should be done

A

Preliminary risk assessment

Is too high risk?
Audit fee
Specific risk areas

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8
Q

Audit acceptance considerations: Ethical considerations: What needs to be considered?

A

Can firm comply with relevant ethical requirements? (OBT)

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9
Q

Audit acceptance considerations: Ethical requirements: For prospective auditors

A

Ask for permission to contact existing auditor

And contact them for info that could influence decision to accept

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10
Q

Audit acceptance considerations: Ethical requirements: Existing auditors

A

Ask client to contact prospective auditor
Then respond

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11
Q

Audit acceptance considerations: CA: When can directors appoint auditor?

A
  1. To fill a casual vacancy
  2. First appointment of auditors
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12
Q

Audit acceptance considerations: CA: How do members have to appoint?

A

Ordinary resolution in GM (>50%)

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13
Q

Audit acceptance considerations: CA: Appointment by members: Appointment deadline

A

28d after LATEST of:
1. Filing
2. Reappointment of existing auditor

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14
Q

Audit acceptance considerations: CA: When does the secretary of state appoint?

A

No auditor appointment in relevant time (rare)

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15
Q

Audit acceptance considerations: CA: 3 people who can appoint?

A
  1. Directors
  2. Members
  3. Secretary of state
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16
Q

Where is terms of audit engagement set out?

A

Engagement letter

17
Q

What does engagement letter do?

A

Acts as contract

18
Q

What do ISAs say en engagement letter includes?

A
  1. Objective and scope
  2. Management responsibilities
  3. Auditor responsibilities
  4. Form & content of reports and communications
  5. Auditor rights to access required info
  6. Expectation that management will provide written representations

Potentially other matters
e.g. Fees and timetabling

19
Q

Is a new EL required every year for recurring audits

A

No
But has to be considered
E.g. when changes in terms of engagement or board of directors

20
Q

Is an EL required for other assurance engagements?

A

Yes
(Arguably more important as less predictable)
Audits regulated by many regulations
Other assurance may be covered by ISAEs or ISREs

21
Q

ISAE

A

International standard on assurance engagements

22
Q

ISRE

A

International standard on review engagements

23
Q

Ceasing to be auditor: Duty of outgoing auditor when ordinary resolution passed in a GM

A
  1. Prepare and submit statement of circumstances
    To Cs registered office
  2. Statement of matters
    To be brought to attention to shareholders/creditors
    Or statement that there aren’t any
24
Q

Ceasing to be auditor: Rights of outgoing auditor when ordinary resolution passed in a GM

A

Written representations to be circulated to members

Receiving notice of, attend and speak at GM where appointment to be considered

25
Q

Ceasing to be auditor: Duty of outgoing auditor when notice submitted to company’s registered office

A

Same

26
Q

Ceasing to be auditor: Rights of outgoing auditor when notice submitted to company’s registered office

A

Same, but for EGM

27
Q

Ceasing to be auditor: CA: EGM definitions

A

Extraordinary General Meeting

Can be called at short notice
(Max 4w after being called)

28
Q

Ceasing to be auditor: Can a statement of circumstances merely state that there are no circumstances to communicate to shareholders/creditors?

A

No

(So issues can’t be walked away from)

AA (16 decks)

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