what are the 2 main ways audit firms win new clients?
tender
advertising (subject to ethical guidance)
what 6 questions need to be satisfied before a new engagement is accepted?
- are we professionally qualified?
- have we communicated with the existing or previous auditors?
- Do we have adequate resources?
- Have we fulfilled the requirements to comply with money laundering regulations 2007 (client due diligence)?
- have we assessed the level of management integrity?
- Have we assessed the level of risk?
what are the sources of information which can be gathered on new clients?
-Client: financial statements, internal audit reports, management accounts
- External: credit ratings bankers, solicitors, laws and regulations, internet search
-Auditor- previous auditor
which one of the following would most likely lead you to decline the appointment as auditor of a prospective new client?
a) The previous years accounts were regarded as not showing a true and fair view by the outgoing auditors
b) The client asked that you have no contact with the outgoing auditor, as the two parties are in dispute
c) the assignment would involve a higher degree of risk than most of your existing clients.
b
what is money laundering?
Money laundering is the concealment of the origins of illegally obtained money, typically by means of transfers involving foreign banks or legitimate businesses.
what has to be done to comply with money laundering regulations 2007?
correct identification needs to be obtained before appointment. This is known as client due diligence
what would the correct identification be for an individual 9directors) and company
photographic ID of the company directors, and also official documentation proving the name, address, and registered number of the company itself
Money laundering often comes to light many years after it has started. Therefore, records have to be kept. How long do they need to be kept for?
five years after the relationship with the client has ended
when should an engagement letter be issued?
a) when we start to plan the audit each year
b) when we accept a new client only
c) when we accept a new client and whenever we feel the letter needs updating
d) only when we take on a new client who does not require other services
c) when we accept a new client and whenever we feel the letter needs updating
what is the overview of what happens after accepting an engagement?
- ensure outgoing auditors removal/ resignation has been properly conducted
- ensure new auditors appointment is valid
- engagement letter
when is an audit engagement letter issued?
after the auditors have accepted nomination
what is the purpose of the engagement letter?
- define extent of the firms management responsibilities
- minimise misunderstandings
- written confirmation of: acceptance, scope, form of reports to be issued
who must engagement letters be sent to?
- all clients not just statutory audits
- send as soon as possible after appointment
the contents of an engagement letter is included in the ISA (UK0 210. What must they include?
- objectives of work/ auditors responsibilities
- managements responsibilities
- scope
- form of any reports
- level of access to books and reports
- reporting framework
