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Chapter 06 - Client Acceptance / Continuation - Coggle Diagram
Chapter 06 - Client Acceptance / Continuation
Advertising, publicity and obtaining professional work
Audit fees
Charge according to estimate workload
Independence threat when fees are lower than work is worth
Audit fees can be fluctuating and firm can reduce fees
Members
Should not obtain or seek work in unprofessional manner
Can advertise, but must be relevant to codes and standards
Should not compare to others
Steps before accepting a client
Outgoing auditors - Professional etiquette letter: The auditor should communicate with the outgoing one to find out why they leave
Client related issues
Formalities (removal of outgoing auditor fulfilled)
Reputation and integrity of the client's management assessed
Consider level of risk attached to the audit. Also whether audit fees are suitable to level of risk
Client screening
Indicators of high risk client: Poor performance, lack of finance, odd accounting, unskilled finance director, unusual transactions
Factors to consider
State of economic sector in which client is operating
Client's previous audit history
Experience and qualification of management of client
Current operating and financial position
Director's understanding of external audit role
Accounting policy used
Evidence of client involving in fraudulent activities
Management permission or refusal to examine significant documents
Preconditions of an audit
Determine whether the financial reporting framework is acceptable in preparing F/S
Obtain the management agreement that it understand and acknowledge responsibility
i. Preparing the F/S according to acceptable framework
ii. Internal control to make F/S free from material errors
iii. Provide auditors with:
Access to all info
Additional info requested
Unrestricted access to persons in entity