Assurance | Course Paper

1

Class Synopsis –02

Prepared by: Abdullah-Al-Mamun, FCA

Process of Assurance: Obtaining an Engagement

Accountants/ Auditors are often invited to tender for particular engagements, which mean

that they offer a quote for services, outlining the personnel, usually in competition with

other firms which are tendering at the same time.

Accepting an Engagement

 The present and proposed auditors should normally communicate about the client

prior to the audit being accepted.

 The client must be asked to give permission for communication to occur. If the client

refuses to give permission, the proposed auditors must consider the reasons for

such refusal.

 The auditors must ensure they have sufficient resources (for example, time and staff)

to carry out the appointment.

 The auditors must undertake to ensure that their appointment is valid and they are

clear to act.

Appointment Consideration

 Schedule C of ICAB Code of Ethics as well as IESBA Code of Ethics sets out the

rules under which accountants should accept new appointments.

 Before a new client is accepted, the auditors must ensure that there are no

independence or other ethical issues likely to cause significant problems with the

ethical code.

 New auditors should ensure that they have been appointed in a proper and legal

manner.

Acceptance Consideration

A practitioner accepts an assurance engagement only where the practitioner’s preliminary

knowledge of the engagement circumstances indicates that:

a) Relevant ethical requirements, such as independence and professional

competence will be satisfied; and

b) The engagement exhibits all of the following characteristics:

i. The subject matter is appropriate ;

ii. The criteria to be used are suitable and are available to the

intended users;

iii. The practitioner has access to sufficient appropriate evidence to

support the practitioner’s conclusion;

iv. The practitioner’s conclusion, in the form appropriate to either a

reasonable assurance engagement or a limited assurance

engagement, is to be contained in a written report; and

v. The practitioner is satisfied that there is a rational purpose for the

engagement. If there is a significant limitation on the scope of the

practitioner’s work, it may be unlikely that the engagement has a

rational purpose.

Acceptance Procedures

 Ensure professionally qualified to act

Consider whether disqualified on legal or ethical grounds, for example, if there

would be a conflict of interest with another client.

 Ensure existing resources adequate

Consider available time, staff and technical expertise

 Obtain references

Make independent enquiries if directors are not personally known.

 Communicate with present auditors

Enquire whether there are reasons/circumstances behind the change which the

new auditors ought to know, also as a matter of courtesy.

Some of the basic factors for consideration are given below:

 The integrity of those managing a company will be of great importance,

particularly if the company is controlled by one or a few dominant personalities.