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Client Acceptance: Principles of Auditing: An Introduction To International Standards On Auditing - Ch. 5
Client Acceptance: Principles of Auditing: An Introduction To International Standards On Auditing - Ch. 5
Client Acceptance: Principles of Auditing: An Introduction To International Standards On Auditing - Ch. 5
Client Acceptance
Principles of Auditing: An Introduction to International Standards on Auditing - Ch. 5
[Hayes, Dassen, Schilder and Wallage, Principles of Auditing An Introduction to ISAs, edition 2.1] Pearson Education Limited 2007
Slide 5.2
Examination of the proposed client to determine if there is any reason to reject the engagement (acceptance OF the client) and convincing the client to hire the auditor (acceptance BY the client) Decide on acquiring a new client or continuation of the relationship with and existing client Determine the type and amount of staff
[Hayes, Dassen, Schilder and Wallage, Principles of Auditing An Introduction to ISAs, edition 2.1] Pearson Education Limited 2007
Slide 5.3
[Hayes, Dassen, Schilder and Wallage, Principles of Auditing An Introduction to ISAs, edition 2.1] Pearson Education Limited 2007
Slide 5.4
Knowledge of a Clients Business Helps Auditors to evaluate the engagement risks associated with accepting the specific engagement and to help the auditor in determining whether all professional and ethical requirements (including independence, competence, etc.) regarding this client can be met.
[Hayes, Dassen, Schilder and Wallage, Principles of Auditing An Introduction to ISAs, edition 2.1] Pearson Education Limited 2007
Slide 5.5
For an existing one, prior years' working papers should be reviewed. For a new client, consult prior auditors and increase preliminary information search.
[Hayes, Dassen, Schilder and Wallage, Principles of Auditing An Introduction to ISAs, edition 2.1] Pearson Education Limited 2007
Slide 5.6
Illustration 5.2
[Hayes, Dassen, Schilder and Wallage, Principles of Auditing An Introduction to ISAs, edition 2.1] Pearson Education Limited 2007
Slide 5.7
Evaluate governance, internal controls and possible risks with client's management and staff including
Changes in management, organizational structure, and activities of the client. Current government regulations Current business developments Current or impending financial difficulties or accounting problems. Susceptibility of the entitys financial statements to material misstatement due to error or fraud.(ISA 315) Existence of related parties. (ISA 550- Final Draft 2006) New or closed premises and plant facilities. Recent or impending changes in technology, types of products or services and production or distribution methods. . Changes in the accounting system and the system of internal control.
[Hayes, Dassen, Schilder and Wallage, Principles of Auditing An Introduction to ISAs, edition 2.1] Pearson Education Limited 2007
Slide 5.8
New Client Review publicly available information, past company financial statements, reports to stockholders, government financial reports (e.g., U.S. SEC 10K report) company premises via tour previous auditor relationship
[Hayes, Dassen, Schilder and Wallage, Principles of Auditing An Introduction to ISAs, edition 2.1] Pearson Education Limited 2007
Slide 5.9
Illustration 5.3
[Hayes, Dassen, Schilder and Wallage, Principles of Auditing An Introduction to ISAs, edition 2.1] Pearson Education Limited 2007
Slide 5.10
Independence of auditor (personal investments, client business relationships, nonaudit services, unpaid fees) Litigation Technical training and proficiency required in the circumstances Partner rotation (SOx 5yrs, EU 7yrs)
[Hayes, Dassen, Schilder and Wallage, Principles of Auditing An Introduction to ISAs, edition 2.1] Pearson Education Limited 2007
Slide 5.11
Slide 5.12
The Group Auditor should document the following in the audit work papers:
The other auditors professional qualifications, independence, professional competence and resources Significant risks of material misstatement that may arise from audit components and the group auditors response to such risks. The basis for the group auditors conclusion to accept or continue the engagement The results of the risk assessment performed at the group level, and a description of the audit procedures to be performed, The group auditors communications with other auditors about the group auditors requirements. The group auditors conclusion on uncorrected misstatements, and the effect of the other auditors reports or memorandums of work performed on the groupaudit opinion.
[Hayes, Dassen, Schilder and Wallage, Principles of Auditing An Introduction to ISAs, edition 2.1] Pearson Education Limited 2007
Slide 5.13
Expert ISA 620 defines an expert as a person or firm possessing special skill, knowledge and experience in a particular field other than accounting and auditing.
[Hayes, Dassen, Schilder and Wallage, Principles of Auditing An Introduction to ISAs, edition 2.1] Pearson Education Limited 2007
Slide 5.14
Slide 5.15
Slide 5.16
Continuing Client Audit Proposal o A review on how the auditing firm can add value o Plans for further improvement in value added o A description of the audit team o Fee proposal
[Hayes, Dassen, Schilder and Wallage, Principles of Auditing An Introduction to ISAs, edition 2.1] Pearson Education Limited 2007
Slide 5.17
New Client Audit Proposal An executive summary Clients business and audit expectations Strengths of the audit firm Audit team Audit approach Clients internal auditors Transition needs Other services of the audit firm After service monitoring Fee details
[Hayes, Dassen, Schilder and Wallage, Principles of Auditing An Introduction to ISAs, edition 2.1] Pearson Education Limited 2007
Slide 5.18
$ the skill and knowledge required for the type of professional services involved $ the level of training and experience of the persons performing the services $ the time necessarily to perform services; $ the degree of responsibility that performing those services entails. $ No contingency fees
[Hayes, Dassen, Schilder and Wallage, Principles of Auditing An Introduction to ISAs, edition 2.1] Pearson Education Limited 2007
Slide 5.19
The objective of the audit Management responsibility for the financial information An applicable financial reporting framework The scope of the audit The form of any reports or other results The fact that some material misstatements may remain undiscovered Unrestricted access to all records, documentation, and other information requested in connection with the audit
[Hayes, Dassen, Schilder and Wallage, Principles of Auditing An Introduction to ISAs, edition 2.1] Pearson Education Limited 2007
Slide 5.20
Any Questions?
[Hayes, Dassen, Schilder and Wallage, Principles of Auditing An Introduction to ISAs, edition 2.1] Pearson Education Limited 2007