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7 Cards in this Set
- Front
- Back
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Client Acceptance and Continuance
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Do we want the client? Closely linked to auditor business risk and audit risk.
AICPA Statement on Quality Control Std. No. 2 Policies and procedures should be established for deciding whether to accept or continue a client relationship and whether to perform a specific engagement for that client. Such policies and procedures should provide the firm with reasonable assurance that the likelihood of association with a client whose management lacks integrity is minimized. Such policies and procedures should also provide reasonable assurance that the firm…appropriately considers the risks associated with providing professional services in the particular circumstances. To minimize the risk of misunderstandings regarding the nature, scope, and limitations of the services to be performed, policies and procedures should provide for obtaining an understanding with the client regarding those services. Professional standards may provide guidance in deciding whether the understanding should be oral or written. |
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Quality Control Considerations for Client Acceptance/Continuance
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-Financial information and health of company
-Management integrity IA, BOD, & AC -Why do they want us?…opinion shopping? -Communicate w/ predecessor auditor (SAS 84, AU 315) -Independence -Fee arrangements -Staffing & specialist issues? -Auditability |
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Contract/Engagement Letter
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the engagement letter formalizes the arrangement by:
- explaining auditor and client responsibilities -addressing specialists and the role of internal audit (AU 336) protecting the auditor from legal liability (potentially) - specifying other services to be provided - providing audit staff with an understanding of the engagement |
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SOX Requirements Regarding the Audit Committee
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-Member of board of directors & independent
-Directly responsible for the appointment, compensation, and oversight of the work of any registered public accounting firm employed by the company. -Must preapprove all audit and nonaudit services provided by its auditors. -Must establish procedures to follow for complaints regarding accounting, internal control, and auditing. -Must have authority to engage independent counsel. |
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General Planning Background Work
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-learn the client’s industry, business, & strategy
-review previous audit results -review the permanent file -tour facilities -i.d. related parties (FAS 57, SAS 45) -conduct preliminary analytical procedures (SAS 65) -assess materiality/risk (SAS 47) consider possibility of errors, fraud, & illegal acts(SASs 54 & 99) -assess the internal audit function |
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How to Identify Related Parties
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-Review board minutes.
-Review conflict-of-interest statements. -Review transactions with major customers, suppliers, borrowers, and lenders. -Review large, unusual, or nonrecurring transactions especially at year end. -Review loan agreements for guarantees. |
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Prepare to Implement the Audit
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-design audit program
-consider timing (interim TOC/ST vs. year-end) -address staffing -consider use of specialists (SAS 11) -consider use of internal audit (SAS 65) -consider use of other auditors -prepare time budgets -consider accounting estimates (SAS 57) |
