What should be considered prior to tendering or acceptance the auditor?
- Nature of the business
- Management integrity
- Potential risk of misstatements
- Reliance of others on the audit report
- Quality of accounting system
- Staff & time available
- Reputation issues
- Ability to make a profit
- Objectivity
What are the contents of a tender?
- Background
- Experience of firm
- Knowledge of staff
- Location
- Other Services
- Proposed fee
What are factors that influence fee calculations?
- Complexity
- Time
- Approach required
- Expenses
- Urgency
- Need for experts
What are the 3 people included in the accepting engagement process?
- The Client
- Proposed Auditor
- Previous Auditor
Access to information by successor auditor
The previous auditor must allow successor access to all relevant information in respect of its audit work including:
- Access to working papers
- Assistance in providing oral and written explanations
- There is no obligations to allow copying of papers, but it would be considered reasonable to share and not a breach of confidentiality (client permission)
Safeguards that would be included conflicts of interest
- Notifying the affected parties of the conflict of interest and obtaining permission to act/ continue to act
- Using separate engagement teams
- Procedures to prevent access to information
- Clear guidelines for members of the engagement team on issues of security and confidentiality
- The use of confidentiality agreements signed by employees
- Regular reviews of the application of safeguards by a senior individual not involved with the relevant client engagement
Agreeing terms of engagement for audits
- The objective and scope of the audit of financial statements (including reference to applicable legislation)
- Management’s responsibilities (including the responsibility for the financial statements)
- The auditor’s responsibilities
- The form and content of reports and communications that will arise from the audit
- The fact that due to the test nature and other limitations of an audit
- The fact that auditors are entitled to unrestricted access to records
What are the responsibilities of the removal of auditors?
- The auditor must write a statement of circumstances and deposit it at the company’s registered office explaining the circumstances of the removal.
- If no circumstances exist a ‘statement of no circumstances’ must be completed
What are the rights of the removal of auditors?
- The auditor has the right to receive notice, attend and speak at the meeting appointing the new auditor(AGM).
- The auditor has the right to have written representations circulated to all the members.
- This latter point prevents directors inappropriately putting auditors up for removal when they have a disagreement with them giving the auditor the right to argue their case.
What are the responsibilities of the resignation of auditors?
- The auditor must submit written notice to the company’s registered office and submit a statement of circumstances explaining the reasoning of their resignation.
- If no circumstances exist a ‘statement of no circumstances’ must be completed.
What are the rights of the resignation of auditors?
- The auditor has the rights to request that the directors convene a general meeting, allowing the auditor to explain the reasonings.
- The auditor has the right to require the directors to circulate the statement of circumstances in advance of the meeting.
