Client Acceptance

Question 1

What is the guidance framework?

Answer 1

Canadian Standard on Quality Control (CSQC) 1

Question 2

What are the items to consider whether accept a new or continue with the client?

Answer 2

• The integrity of the principal owners, key management and those charged with governance of the entity;
• Whether the engagement team is competent to perform the audit engagement and has the necessary capabilities, including time and resources;
• Whether the firm and the engagement team can comply with relevant ethical requirements; and
• Significant matters that have arisen during the current or previous audit engagement, and their implications for continuing the relationship.

Question 3

What are the factors to consider when assessing a client’s integrity?

Answer 3

• What is the reputation of the client in the business community? What is the reputation of the client’s management, directors, and key stakeholders?
• What is the client’s attitude toward risk? How does the client manage risk?
• Will the client be co-operative in providing the practitioner with access to the information?
• What is the client’s attitude toward the audit fee?
• In the case of a client acceptance decision, why does the potential client want to switch audit firms?

Question 4

What are the procedures to gauge the integrity of a client?

Answer 4

• In the case of a client acceptance decision, communicate with the previous auditor, where applicable.
• Communicate with independent third parties, such as lawyers and creditors.
• Perform a background check of the client.
• Obtain and scan financial statements from prior periods.

Question 5

What are the criteria for accepting a new engagement?

Answer 5

Is the financial reporting framework to be applied in the preparation of the financial statements appropriate?independence prohibitions, threats, or conflicts of interest between the practitioner and the client
Is the practitioner able to mitigate or accept engagement risk factors?
What are the user’s requirements for this engagement?
industry legislation or regulations impacting the financial reporting requirement
management agreed to its responsibilities in writing?
any known scope limitations that may restrict the ability to provide an opinion

Question 6

What is the purpose of the engagement letter

Answer 6

The engagement letter sets out the terms of the engagement and confirms the obligations of both the client and the practitioner

Sets out the terms of the engagement

Need to be ack. by the client prior to starting the work

Sent after the client has been accepted