Tender & Acceptance Flashcards
(29 cards)
What is the mnemonic for remembering the matters to be considered when tendering or accepting audit work?
TRIMROT
What factor does the ‘T’ stand for?
Provide matters to consider and the procedures to address this.
Technical competence
MTC: Does the firm have skills / expertise for the work / in the industry e.g Crypto.
Procedure: Review team profiles / training / need for an expert?
What factor does the ‘R’ stand for?
Provide matters to consider and the procedures to address this.
Resources
MTC: Is there enough staff available?
Procedure: Review staff planner / timetable / speak with senior members to seek available staff.
What factor does the ‘I’ stand for?
Provide matters to consider and the procedures to address this.
Independence
MTC: Are there ethical threats, are all personal acting with independence, can threats be overcome?
Procedure: Implement safeguards (T2)
Consult ethics partner, call ICAEW helpline for advice.
What factor does the ‘M’ stand for?
Provide matters to consider and the procedures to address this.
Money Laundering
MTC: Are there initial indications of ML e.g. strange / unusual transactions.
Procedure: Client ID Checks
What factor does the ‘R’ stand for?
Provide matters to consider and the procedures to address this.
References / Risk (management integrity)
MTC: What is the directors background? Can we rely on the work they produce / provide to us?
Procedure: Background checks, credit checks
What factor does the ‘O’ stand for?
Provide matters to consider and the procedures to address this.
Outgoing Auditors
MTC: Why did they resign / removed?
Procedure: 7 step procedure
What factor does the ‘T’ stand for?
Provide matters to consider and the procedures to address this.
Terms of engagement
MTC: Is it an Audit or another type of assurance such as Forecast?
Terms of engagement should be easy for an audit but may need clarification for others.
Procedure: Obtain a signed engagement letter.
What are the Factors that an ENTITY should consider when evaluating a firm’s Tender?
> Audit fee - BVFM
Personnel on the audit team - efficiency / expertise (technical competence & resources)
Timetable - busy season?
CoI - confidentiality
Additional services - efficiency / quality
What is the 7 step procedure when contacting outgoing auditors (OA)?
- Explain to client there is a duty to contact OA
- Obtain client’s permission to contact
- Not given = do not accept audit
- Send letter to OA
- OA replies mentioning anything untoward.
- If not reply, chase
- No reply - send OA a letter informing them you take their silence as evidence there were no issues and intend to perform audit.
According to the ICAEW Code of Ethics, how should fees for an engagement be determined?
Personnel, time, risk, complexity, expenses.
What are the considerations before accepting an appointment as Auditor?
LERR
Legal issues - carried out by CA06?
Ethical barriers
Risk analysis:
- Identify clients too high risk.
- Fee
- Initial understanding of risk areas.
Resources
What is the Process when an Auditor is sacked (Removal) ?
Ordinary resolution passed at a general meeting.
What is the Duty of the Outgoing Auditor?
Prepare and submit a ‘statement of circumstance’ to the company’s RO.
a statement of matters to be brought to the attention of SH / creditors or no such circumstances.
What are the Rights of the Outgoing Auditor?
Prepare WR to be circulated to the members.
Receive notice of, attend and speak at the meeting where appointment is considered.
When there is Resignation of an Auditor, what is the Process, Duties and Rights of the Outgoing Auditor?
Process: same as removal
Duty: same as removal
Rights:
Prepare WR to be circulated to members.
Request, attend and speak at the EGM.
What should an Engagement letter cover?
Agreeing terms of an audit ISA210
- Objective + scope of the audit of FS.
- Responsibilities
- Form and content of reports / communications of audit.
- Auditor’s rights to access records, etc.
What should an Engagement letter cover?
Agreeing terms of an assurance
- Work that will be carried out.
- Form and content of any report.
What are the benefits for the client and audit firm regarding Quality Management? (2)
The need for quality management
Client receives an acceptable level of service.
Firm should reduce audit risk to an acceptable level.
The Engagement quality reviewer’s work should include: (5)
UDREE
- Understand nature / circumstances of engagement.
- Discuss significant matters with engagement partner.
- Review selected audit documentation re sig matters.
- Evaluate partner’s assessment of ethical independence.
- Evaluate conclusions on difficult matters.
What should be considered for Audits in a EQR? (8)
Independence.
Significant risks / responses.
Judgements re materiality.
Advice by external experts.
Nature/scope of misstatements.
Subjects discussed with AC.
Documents support audit opinion.
Evaluation re partner’s involvement.
Cold review
Purpose:
When:
Which clients:
Monitoring and remediation
To assess whether firms policies/procedures implemented during engagement, to identify deficiencies.
After auditor report signed.
A selection of completed audit files.
An audit firm needs the following to conduct a good quality audit:
HEAL ME
Human resources
Ethics
Acceptance / continuance procedures.
Leadership
Monitoring
Engagement performance (direction/supervision/review).
What is meant be Leadership in a good quality audit? (3)
Tone set from the top, managers promote quality, discipline those who don’t follow procedures.
