{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}


Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1 PRE-ENGAGEMENT ARRANGEMENTS Pre-audit risk management activities are activities undertaken by auditors before beginning any audit work on an organization’s financial statements. They include: 1. Risk management 2. Quality management AUDIT ENGAGEMENT ACCEPTANCE AND CONTINUANCE Acceptance and continuance decisions involve the following policies and procedures: 1. OBTAIN AND REVIEW FINANCIAL INFORMATION about the prospective auditee organization (e.g., annual reports, interim financial statements, registration statements, annual information forms, and reports to regulatory agencies) to determine the purpose and main users of the financial statements and the basis of accounting being used 2. EVALUATE INDEPENDENCY between the public accounting firm and individual auditors to determine ability to comply relevant ethical requirements with regard to the prospective auditee 3. CONSIDER COMPETENCY AND RESOURCES OF THE PUBLIC ACCOUNTING FIRM to evaluate whether they are capable of performing the audit, including any need for special skills (e.g., information systems auditing or specialized industry knowledge) 4. UNDERSTAND THE BUSINESS AND ITS RISKS to assess whether the organization’s managers and those charged with its governance are willing/able to accept responsibility for - Preparing financial statements in accordance with an acceptable financial reporting framework - Implementing adequate controls to reduce risk of error and fraud 5. CONSIDER WHETHER THE ENGAGEMENT REQUIRES SPECIAL ATTENTION OR INVOLVES UNUSUAL RISKS Examples: - Does financial statement users rely heavily on the general purpose FS for important financial decisions and/or have no access to other information about the company’s financial condition and performance? - Is there a high media interest in the organization - Is management competence or integrity is questionable? 6. USE ALL SOURCES TO KNOW MORE ABOUT THE COMPANY - Use news reports - When possible, ask the prospective auditee’s banker, legal counsel, underwriter, or other business associates about the organization 7. FOR NEW AUDITS , COMMUNICATE WITH THE PREVIOUS AUDITOR (if possible) for information on the: - Integrity of management - Disagreements with management about accounting principles and procedures or similar matters - Reasons for a change of auditors
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
2 Further details and guidance on the matters to consider prior to accepting the audit are provided in CSQC-1 and CAS 210 DETERMINING AUDITIBILITY The auditor considers 1. Whether the financial statements presented in accordance with GAAP 2. Whether management understands its responsibility for preparing the financial statements, and for designing and implementing adequate internal controls 3. Management’s commitment to providing written representations or other scope limitations Auditee Retention Decisions to continue auditing an organization are similar to acceptance decisions PLUS the public accounting will have more first-hand experience with the auditee -
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}