1. Discuss the activities in the pre-planning audit phase of audit.

The activities in the pre-planning audit phase of audit begins with a question, has the auditor
determined the client’s integrity, and if applicable, communicated with the predecessor auditor? If no,
then the auditor will likely decline the engagement. If yes, another question will arise, is the auditor in
compliance with relevant ethical requirements? These include: integrity, objectivity, professional
competence and due care, confidentiality, professional behaviour, and independence. If no, then the
auditor will likely decline the engagement. If yes, then another question will arise, does the auditor
possess the necessary competence, capabilities, time, and resources? The following should be considered:
sufficient personnel who have competence, capabilities, and knowledge of industries or subject matter,
experience or knowledge with regulatory requirements, experts if needed such as work of actuaries,
appraisers, etc., individuals who can perform quality review, and time to complete the engagement within
the reporting deadline. If no, then the auditor will likely decline the engagement. If yes, then another
question will arise, has the auditor agreed the basis of audit engagement by: establishing preconditions for
an audit engagements and reaching agreement on terms of audit engagement? If no, then the auditor will
likely decline the engagement. If yes, then another question will arise, has the auditor determined any
scope limitation that will result in disclaimer of opinion? If yes, then the auditor will likely decline the
engagement. If no, then likely the auditor will accept the engagement, document the terms in a written
audit engagement letter.
2. Enumerate client acceptance and continuance considerations.
The following are the considerations of client acceptance and continuance:
1. Whether the auditor has sufficient personnel who have competence, capabilities, and knowledge
of industries or subject matter
2. Whether the auditor has experience or knowledge with regulatory requirements
3. Whether the auditor has experts if needed such as work of actuaries, appraisers, etc.
4. Whether the auditor has individuals who can perform quality review
5. Whether the auditor has time to complete the engagement within the reporting deadline

3. Discuss the basis of audit engagement that the auditor should establish.
Once an engagement is considered acceptable, the auditor establishes the basis of engagement
through:
1. Audit Preconditions
 The auditor should not accept the engagement, unless required by law or regulation, without the
following audit preconditions: use of acceptable financial reporting framework available to financial
statements users and agreement with management and those charged with governance.
2. Terms of Engagements
The agreed terms are documented in an engagement letter or other written contract. It is in the
interest of both the client and auditor that the auditor sends the engagement letter before the
commencement of audit to avoid misunderstandings. The letter shall include: the objective and scope
of the auditor of the financial statements, the responsibilities of the auditor, the responsibilities of the
management, identification of the applicable financial reporting framework for the preparation of
financial statements and reference to auditor’s reports and possible modifications thereon. Additional
matters that could be included are the following: planning and performance of audit, including audit
composition and details and dates of draft financial statements or other working papers to be prepared
by the client, involvement of other auditors and experts, involvement of predecessor auditor with
respect to opening balances and other related matters.