Pre-engagement

Integrity of Client

Independence of auditor

Changes in entity for existing clients

Affect the ability to continue with engagement

Changes in owners/ management

Problems encountered during previous audits

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Information obtained from predecessor auditor

Financial responsibility of the Client

Terms of the engagement

Legal Procedures in respect of engagement

Skills and competence requirements

s45 & s46 of APA - Reportable irregularities arising from illegal contracts

Does the co. have to be audited? Public? yes. Private? PIS

s91 of Co's Act

Vacancy available?

Personnel have relevant knowledge of industry / subject matters (Complex Acc issues)

Experience with the 1. regulatory environment, 2. reporting requirements or ability to obtain it

Number of personnel (Multiple locations)

Experts needed when not familiar with 1. environment, 2. industry or 3. complex transactions

Size of the firm

Meet audit deadline

Sufficient time to gain an understanding of the business and or do an interim audit (Listed Co's)

CPC Threats:

  • Explain issue

The independence of the firm IF Most Rev of firm is from that client

  • Name threat

Financial interest threat compromises the independence of the audit partner AND

  • Significance of threat (explain why) e.g Threat significant because of mngmt position of family member

Threats as per CPC

Inappropriate limitation in audit scope

Indications of Money laundering or other illegal activities

Client wants to keep audit fees low as possible

Weak control environment:

Solvency level (Going Concern), plans for future developments (Retrenchments, cutbacks, proposed listings, M&A)

  • segregation of duties

Attitude of 1. KMP, 2. those charged with Gov, & 3. Owners towards acc stds

  • Weak gov structures

Business practices, nature of operations

  • Informal record keeping (Excel)

Integrity & Reputation of 1. client and KMP , 2. those charged with Gov, 3. Related parties

  • Inability to do Journals/ compile AFS

Reasons for appointment and not the previous auditors

Client History - 1. Lawsuits, 2. non-compliance with laws, 3. press reports, 4. late AFS, 5. Qualified audit opinions, 6. Frequent changes of auditors

NB to emphasise auditors responsibility to Report RI

  • Possible safeguards