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    The document discusses the process of obtaining an audit engagement, including advertising services, tendering for audits, acceptance procedures, assessing risk levels, customer due diligence, and agreeing terms in an engagement letter. Key acceptance procedures involve ensuring qualifications, resources, obtaining references, communicating with prior auditors, and considering independence. High risk engagements may involve poor performance, lack of financing, or questionable accounting, while low risk engagements have strong controls and conservative policies. The engagement letter defines responsibilities, scope, reporting framework, and report forms.

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    The document discusses the process of obtaining an audit engagement, including advertising services, tendering for audits, acceptance procedures, assessing risk levels, customer due diligence, and agreeing terms in an engagement letter. Key acceptance procedures involve ensuring qualifications, resources, obtaining references, communicating with prior auditors, and considering independence. High risk engagements may involve poor performance, lack of financing, or questionable accounting, while low risk engagements have strong controls and conservative policies. The engagement letter defines responsibilities, scope, reporting framework, and report forms.

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    8 views12 pages

    Chapter 2

    Uploaded by

    huynguyen2905bmt
    The document discusses the process of obtaining an audit engagement, including advertising services, tendering for audits, acceptance procedures, assessing risk levels, customer due diligence, and agreeing terms in an engagement letter. Key acceptance procedures involve ensuring qualifications, resources, obtaining references, communicating with prior auditors, and considering independence. High risk engagements may involve poor performance, lack of financing, or questionable accounting, while low risk engagements have strong controls and conservative policies. The engagement letter defines responsibilities, scope, reporting framework, and report forms.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    of 12

    Chapter 2:Process of assurance:

    obtaining an engagement

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    Topic list

    1. Obtaining an engagement
    2. Accepting an engagement
    3. Agreeing terms of an engagement

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    1.Obtaining an engagement
    • Auditors may advertise their services, within
    certain boundaries
    • Auditors will often be invited to tender for
    audits

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    2. Accepting an engagement

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    Procedures before acceptance
    • Ensure professionally • Consider whether they could
    be disqualified on legal or
    qualified to act ethical grounds
    • Ensure existing • Consider available time, staff
    resources adequate and technical expertise
    • Make independent enquiries if
    • Obtain references directors are not personally
    known
    • Enquire whether there are
    • Communicate with reasons/circumstances behind
    present auditors the change which the new
    auditors ought to know, also as
    a courtesy

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    High risk or low risk?
    LOW RISK HIGH RISK
    Good long-term prospects Poor recent or forecast
    performance
    Well-financed Likely lack of finance
    Strong internal controls Significant control deficiencies
    Conservative, prudent accounting Evidence of questionable integrity,
    policies doubtful accounting policies
    Competent, honest management Lack of finance director

    Few unusual transactions Significant related party or


    unexplained transactions

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    Procedures after acceptance
    • Ensure that the outgoing auditors’ removal or
    resignation has been properly conducted
    • Ensure that the new auditors’ appointment is
    valid.
    • Carry out customer due diligence in accordance
    with money laundering regulations
    • Set up and submit a letter of engagement to the
    directors of the company.

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    Customer due diligence
    • For individuals: obtaining official documents including a
    photograph and identifying the client’s full name and
    permanent address
    • For companies: obtaining similar legal information from the
    Registrar of Companies; for example, a certificate of
    incorporation, the registered address and a list of
    shareholders and directors
    • Client identification documents must be kepts for a
    minimum of five years and until five years have elapsed
    since the relationship with the client has ceased

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    3. Agreeing terms of an engagement

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    The purpose of an engagement
    letter
    • Define clearly the extent of the firm’s responsibilities
    and so minimize the possibility of any
    misunderstanding between the client and the firm
    • Provide written confirmation of the firm’s acceptance
    of the appointment, the scope of the
    engagement and the form of their report

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    Contents of engagement letter
    OS RRRR
    • Objectives
    • Scope
    • Responsibilities of auditor
    • Responsibilities of managements
    • Reporting framework
    • Report (forms)

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    Discussion question

    You are an audit intern of ABC company,


    a client of PwC HCM. You are in charge
    of payroll section, but when you see the
    payroll accountant to request the data
    (payroll sheet…), she refuses to give you
    the needed data because these data are
    strictly confidential. What should you
    do?

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW

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