Engagement Acceptance

Question 1

What are the stages of an audit?

Answer 1

Pre-engagement acceptance activities > Engagement letter > Audit strat4egy & planning > Internal control evaluation > Substantive procedures > Audit completion > Report preparation and communication > Post-audit responsibilities & audit quality control

Question 2

Assessment of auditor’s capability

Answer 2

Auditor must ensure they’re independent and adhere to all relevant ethical rules of conduct;
Auditor should ascertain that they have the necessary time & resources to finish the audit;
Auditor should ensure that the audit team possesses the skills and personnel required to complete the engagement effectively.

Question 3

What topics should be discussed with the predecessor auditor?

Answer 3

Reasons for change
Integrity of management
Past audit disagreements or disputes
Communications with the audit committee
Related party and unusual transactions

Question 4

Is it a requirement to have a written understanding in the form of an engagement letter with the client?

Answer 4

Yes

Question 5

What are the components of the engagement letter?

Answer 5

Parties to the agreement
Objectives and scope of audit
Management’s responsibilities
Auditor’s responsibilities
Limitations of the audit
Form of the audit report
Fees and other arrangements

Question 6

Can a client request a change in the terms of the engagement?

Answer 6

Yes, if the request is reasonable.
No, if the request is unreasonable.

Question 7

If the client has a reasonable request to change the terms of the engagement, what should the auditor do?

Answer 7

The subsequent report issued on the altered service should not make any reference to the original audit engagement, or any audit procedures/tasks conducted during the original audit engagement.

Question 8

If the client has an unreasonable request to change the terms of the engagement, what should the auditor do?

Answer 8

Decline any change in engagement terms. The auditor should withdraw from the engagement and communicate the reasons for withdrawal and their concerns to those charged with governance. The auditor has an obligation to inform other stakeholders or regulatory bodies about their withdrawal and the reasons for it.