Chapter 6 - Planning, understanding the entity and evaluating business risk. In this chapter we will discuss: explain why the decision to accept a client is important, and describe the primary features of client acceptance and continuance; indicate the purpose and content of an audit engagement letter; describe the decisions made by an auditor in preparing an audit plan, the knowledge on which the decisions are based and the procedures used to obtain that knowledge. | Chapter 6 Planning, understanding the entity and evaluating business risk 6- Copyright © 2010 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 4e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett Learning objective 1: Client acceptance and continuance APES 320 and ASQC 1 (ISQC1) require an audit firm, as part of its quality control, to establish policies for: Investigating potential clients and acceptance of an engagement Periodically reviewing continuance of clients. Policies and procedures for client acceptance and continuance are important as an audit firm will want to avoid association with a client whose management lacks integrity. 6- Copyright © 2010 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 4e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett Client acceptance and continuance 6- Copyright © 2010 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 4e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett Acceptance and continuance evaluation procedures Procedures carried out before accepting a new client or continuing with an existing client include: Obtaining and reviewing available financial information regarding the client Making inquiries of third parties such as solicitors and bankers Communicating with previous auditor Evaluating the firm’s independence and ability to serve the client, including technical skills and knowledge of industry and personnel; and Ensuring accepting engagement will not violate the Code of Ethics. 6- Copyright © 2010 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 4e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett Communication with previous auditor Communication assists in ensuring that the interests of shareholders, the incoming auditor and existing auditor are protected. It allows the existing auditor to . | Chapter 6 Planning, understanding the entity and evaluating business risk 6- Copyright © 2010 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 4e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett Learning objective 1: Client acceptance and continuance APES 320 and ASQC 1 (ISQC1) require an audit firm, as part of its quality control, to establish policies for: Investigating potential clients and acceptance of an engagement Periodically reviewing continuance of clients. Policies and procedures for client acceptance and continuance are important as an audit firm will want to avoid association with a client whose management lacks integrity. 6- Copyright © 2010 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 4e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett Client acceptance and continuance 6- Copyright © 2010 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance
