Chapter 2 - obtaining an engagment

Question 1

What are the 2 ways of obtaining an engagement?

Answer 1

1. Tender → pitch from client)
2. Advertising auditory services

Question 2

What factors need to be considered prior to excepting a client? (5 marks)

Answer 2

• If we are professionally qualified to act
• Have we communicated with previous auditors
• Have we assessed the level of management integrity (client reputation)
• Have we assessed the level of risk
• Have we filled the requirements to comply with money laundering regulations

Question 3

Where and what infomation do we source when taking on a new clients?

Answer 3

Question 4

1. What is a money laundering check?
2. What do the money laundering regulations say must happen with the documents?

Answer 4

1. Obtaining identification of the individual and the company

• Individual → passport or drivers license
• Company → identification from companies house

2.Client identification documents kept for a minimum of 5 years or 5 years after the relationship with the client has ceased

Question 5

What must be done after to accepting an engagement?

Answer 5

• Insure old auditors removed
• Ensure new auditors appointment is valid
• Submit a letter of engagement directors (contract)

Question 6

Who must the letters of engagment be sent to?

Answer 6

All new and existing clients everytime a new engagment is taken on

Question 7

1. What contents must be included int th engagment latter?
2. What contents may be included in the engagment letter?

Answer 7

• Scope of work → type of audit
• Form of report → opnion or conclusion
• Reporting framework → UK GAAP or ISA
• Inherit limitations → computer limitations
• Restrictions → maximum amount c client can sue an auditor for
• Basis of fee calculations → staff, travel + costs