f) A change in the financial reporting framework adopted in the preparation of the financial

statements. The engagement letter clarifies the role of auditors and those charged with
governance, it identifies the reporting framework of the financial statements and if this change,
then the letter requires updating.
g) A change in other reporting requirements. Other reporting requirements may be stipulated in
the engagement letter; hence if these change, the letter should be updated

19. Curcuma & Co, a firm of Chartered Certified Accountants, has recently obtained a new audit client,
Cinnamon Brothers Co (Cinnamon), whose year‐end is 31 December. Cinnamon requires its audit
to be completed by the end of February; however, this is a very busy time for Curcuma and so it
intends to use more junior staff as they are available. Additionally, in order to save time and cost,
Curcuma has not contacted Cinnamon's previous auditors. Describe the steps that Curcuma & Co
should take in relation to Cinnamon:
i. Prior to accepting the audit
ii. To confirm whether the preconditions for the audit are in place

Prior to accepting Cinnamon as an audit client, Curcuma should carry out the following procedures.
a) Ensure the firm is professionally qualified to act: Curcuma will need to consider whether it could
be disqualified to audit Cinnamon on legal or ethical grounds. This includes evaluating any
threats to auditor independence and ensuring that the engagement is compliant both with the
ACCA's Code of Ethics and Conduct and with local legislation.
b) Ensure existing resources are adequate: Curcuma will need to ensure that it has the staff and
technical expertise required to perform the audit competently within the timescale agreed.
c) Obtain references: Curcuma will need to verify the identity, reputation and integrity of
Cinnamon's directors. If necessary, references should be obtained for the directors.
d) Consider the associated risk: Based on the knowledge obtained about Cinnamon's business and
its directors, Curcuma will need to determine the level of risk associated with the audit
engagement. It will need to assess whether the level of risk is acceptable to the firm, and
whether the proposed audit fee is appropriate in the light of the associated risk.
e) Communicate with the predecessor auditors: Curcuma should enquire about Cinnamon's reason
for not reappointing its previous auditor. It should obtain permission from Cinnamon's directors
to contact the outgoing auditor, and then communicate with the outgoing auditor to confirm
whether there have been any actions by the client which would on ethical grounds preclude
Curcuma from accepting the engagement. The outgoing auditor will also require the directors'
permission to respond to Curcuma's request.

If the directors refuse to allow Curcuma to communicate with the outgoing auditor, or withholds
permission for the outgoing auditor to respond, Curcuma should not accept the audit engagement.

Preconditions for the audit

Auditors must only accept a new audit engagement if the preconditions for the audit are present.
To determine whether the preconditions for the audit are present, Curcuma should do the following.