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    Accepting Engagement: Chapter 2 (Part 3)

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    Qin Yun
    (1) Audit firms confirm the scope of an engagement by establishing the terms in an engagement letter, including fees, liability caps, objectives and responsibilities. (2) Engagement letters are required and should cover management's responsibilities, the auditor's responsibilities including reports, access to records, and representations from management. (3) For recurring audits, a new letter is not always needed but may be required if terms change, management or ownership changes substantially, or the business or financial reporting framework changes significantly.

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    Accepting Engagement: Chapter 2 (Part 3)

    Uploaded by

    Qin Yun
    53 views10 pages
    (1) Audit firms confirm the scope of an engagement by establishing the terms in an engagement letter, including fees, liability caps, objectives and responsibilities. (2) Engagement letters are required and should cover management's responsibilities, the auditor's responsibilities including reports, access to records, and representations from management. (3) For recurring audits, a new letter is not always needed but may be required if terms change, management or ownership changes substantially, or the business or financial reporting framework changes significantly.

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    accepting engagement

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    Audit

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    (1) Audit firms confirm the scope of an engagement by establishing the terms in an engagement letter, including fees, liability caps, objectives and responsibilities. (2) Engagement letters are required and should cover management's responsibilities, the auditor's responsibilities including reports, access to records, and representations from management. (3) For recurring audits, a new letter is not always needed but may be required if terms change, management or ownership changes substantially, or the business or financial reporting framework changes significantly.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    53 views10 pages

    Accepting Engagement: Chapter 2 (Part 3)

    Uploaded by

    Qin Yun
    (1) Audit firms confirm the scope of an engagement by establishing the terms in an engagement letter, including fees, liability caps, objectives and responsibilities. (2) Engagement letters are required and should cover management's responsibilities, the auditor's responsibilities including reports, access to records, and representations from management. (3) For recurring audits, a new letter is not always needed but may be required if terms change, management or ownership changes substantially, or the business or financial reporting framework changes significantly.

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    of 10

    ACCEPTING

    ENGAGEMENT
    CHAPTER 2 (PART 3)
    LEARNING OBJECTIVE 4:

    To learn how do audit/assurance firms


    confirm the scope of the engagement?
    TERMS OF AN AUDIT ENGAGEMENT
    (1) The scope of audit engagement is determined by law and
    professional standards
    (2) Auditor must make sure that the terms are understood by
    the client
    (3) Two matters that need to be agreed upfront:
    - the fee or the basis by which the fee will be determined
    - the limited liability (the cap on auditor’s liability)
    AUDIT ENGAGEMENT LETTERS
    1. Engagement letters are required under the standards.
    The requirement is to have the term of the engagement
    are put in writing
    2. The form and content of an engagement letter may vary
    but it should cover the following matters:
    - the objective & the scope of the audit of FS
    - management’s responsibilities (includes the internal
    control.
    AUDIT ENGAGEMENT LETTERS (cont)
    3. The auditor’s responsibilities (on the letter):
    - The form and content of reports and communication that will arise
    from the audit
    - The fact that due to the test nature & other limitations of an audit
    - The fact that auditors are entitled to unrestricted access to records,
    documents & others that requested for the audit
    - The expectation that the management will provide written
    representations
    - Cover practical matters such as arrangements relating to planning,
    using the experts, liaising with internal audit dept, etc.
    RECURRING AUDITS
    1. It is not necessary to issue a new engagement letter for
    each year
    2. However, auditors should consider whether a new
    letter is required every year
    3. There are factors that may indicate a new engagement
    letter is required, as below:
    RECURRING AUDITS (cont)
    (a) Indication that the client misunderstand the terms of the
    engagement
    (b) Revised or special terms of the engagement
    (c) A recent change in senior management of directors
    (d) A significant change in ownership of the company
    (e) A significant change in the nature or size of the company
    (f) Legal or regulatory requirements
    (g) A change in the financial reporting framework adopted in the
    preparation of the FS
    CHANGES IN ENGAGEMENT
    1. It happens when an auditor is asked to change the engagement
    2. For e.g : if the audit is a statutory audit, the auditor must provide
    an appropriate audit as required by the law (giving reasonable
    assurance on the true and fairness of the engagement
    3. If the terms are changed, the auditor and the client must agree on
    the terms. If both cannot agree, the auditor should withdraw
    from the arrangement
    DISCLOSURE OF THE TERMS OF AGREEMENT
    1. The standard requests for potential future regulations requiring
    disclosure of the terms of the audit engagement
    2. However there are no such regulations in place
    Thank you

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