Ch.3 Client Acceptance

Question 1

What does CSQC1 and CAS 220 identify for auditors for the first stage of the audit?

Answer 1

They identify the responsibilities when considering accepting an audit engagement or continuing to provide an audit engagement services to an existent client.

Question 2

What are some considerations an engagement partner should determine?

Answer 2

• integrity of the owners, key management, and those charged with governance
• competence of the engagement team toperform the audit engagement and has the capabilities, including time and resources
• whether firm and engagement can comply with ethical requirements.
• sig. matters that arose during the previous or current engagement and implications for continuing this relationship

Question 3

How can you assess the integrity of the client?

Answer 3

• Look at their reputation in the business community, what is the reputation of their management, directors, and key stakeholders?
• what is their attitude towards risk? how do they manage risk?
• will the client be cooperative with information
• what is the attitude towards audit fees
• is there is a switch in audit firms, what is the reason behind the switch?

To answer these questions, the auditor can communicate with previous auditors, communicate with independent 3rd parties, perform background checks, and obtain and scan financial statements from prior periods.

Question 4

Where can you find the criterias to accept or decline an engagement?

Answer 4

CAS 210 and CSQC 1

Question 5

What are the remaining items to consider after assessing the criteria for the client when accepting or declining the engagement?

Answer 5

• Is the finanical reprting framework in the FS appropriate?
• Are there any independence prohibitions, threats, or conflicts of interest between the practiioner and the client?
• Is the practitioner able to mitigate or accept engagement risk factors?
• Is there industry legislation or regulations that may impact the finanical reporting requirements of the client?
• Has the client’s manaagmeent agreed to its responsibilities in writing?

Question 6

What are the circumstances laid out in CAS 210 that an practioner must decline an audit?

Answer 6

When management doe snot acknowledge its responsoibilities in writing

When the chosen financial reporting framework is not acceptable

Question 7

What must happen after you accept an engagement?

Answer 7

You must prepare a engagement letter with the following:

objective and scope of the audit of the financial statements

responsibilites of the practiioner and management

identification of the applicable financial reporting framework for the preparation of the finanical statements

reference to the expected form and content of any reports to be issued by the practitioner and a statement that there may be a circumstances in which a report may differ in its expected form and content

the basis of which fees are computed and any billing arrangements.