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Chapter 2: Process of assurance - obtaining an engagement - Coggle Diagram
Chapter 2: Process of assurance - obtaining an engagement
Obtaining an engagement
Assurance firms/Accountants arre permitted to advertise for client within certain professional guidelines
Accountants are often invited to tender for particular engagements - offers a quote of services
Accepting an
engagement
Appointment considerations
Before accepting any new appointment, auditors must determine whether there are any
independence or ethical issues
likely to cause problems with ethical code
Must carry out the
following procedures:
Ensure
professional qualified to act
- đủ trình độ, bằng cấp, ethic để làm việc không
Ensure
existing resources adequate
- đủ thời gian, staff và nguồn nhân lực làm hay không?
Obtain references
- có đủ tài liệu tham khảo hay không, nếu không thì phải thực hiện tham khảo/khảo sát
Communicate with existing/predecessor auditors (nếu có) - liên hệ KTV tiền nhiệm nếu có bằng mọi cách
Some basic factors for consideration
The integrity of those managing a company will be of great importance - particularly if the company is controlled by 1/few dominant personalities
The audit firm will also
consider
whether
the client is likely to be
high or low risk
to the firm
Low risk
Good long-term prospects
Well-financed
Strong internal controls
Conservative, prudent accounting policies
Competence and honest management
Few unusual transactions
High risk
Poor recent or forecast performance
Lack of finance
Significant control weaknesses
Evidence of questionable integrity, doubtful accounting policies
Lack of finance director
Significant unexplained transactions or transactions with connected companies
The expected fee from a new client
should reflect the level of risk
The audit firm will generally want the relationship with client to be long-term
Some sources of documents
about new client
Enquiries of other sources
Review of new documents
Previous accountants/auditors
Review of rules and standards
Appointment decision chart
Things should be carried out after accepting nomination
Ensure that outgoing auditors' removal or resignation has been properly conducted
Ensure that new auditors' appointment is valid
Submit the letter of engagement
New auditors should obtain all books and papers which belong to the client from outgoing auditors
Other assurance engagements:
Similar considerations will be required
for any assurance engagements
The legal considerations relating to audit
will not be relevant to other assurance
engagements, but the ethical, risk and
practical considerations will be just as valid.
Money laundering regulation
assurance firms must keep certain records about clients and undertake what is known as client due diligence.
mandatory to check
the identity of all clients
before any work is undertaken
When an ongoing relationship is envisaged
where a one-off transaction or a series of transactions greater than €10,000 will take place.
Clients' identity should be check:
For individuals - Obtaining official documents
For companies - obtaining similar legal information from the Registrar of Companies
Agreeing terms of an engagement
Purpose of an engagement letter
define clearly the extent of the firm's responsibilities
minimise 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.
Audit engagement letters
Items MUST/SHALL BE including in
Objective of the audit of FS
The scope of audit
Auditors' responsibility
Reporting framework
management's responsibilities
Form of any reports of results of the engagement
Point COULD BE made
arrangements concerning the involvement of
other auditors and experts
arrangements concerning the involvement
of internal auditors and other client staff
arrangements to be made with the predecessor auditor
any restriction of the auditor's liability
a reference to any further agreements between
the auditor and the client
any obligations to provide audit working papers to other parties
Items MAY WISH to be included
the form of any other communication
of the results of the engagement
the fact that there is an unavoidable
risk that some material misstatements
may remain undiscovered
arrangements regarding the planning of the audit
expectation of receiving from management
written confirmation of representations made
in connection with the audit
agreement of the client to provide
the auditor with information in time
basis on which fees are computed
and any billing arrangements
request for the client to confirm
the terms of the engagement
