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Chapter 8
What matters should Juliet B consider before accepting the
appointment?
What matters should be discussed at the meeting?
Draft an engagement letter
This can be based on Appendix1
What might be the consequences of omissions from the letter?
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Examination question
(a) Internal matters and other procedures before appointment
The firm needs to consider a variety of commercial issues and ethical matters
(under ACCA’s Rules of Professional Conduct).
Internal matters
Before accepting appointment the firm should ensure that:
(i) it has the necessary staff with appropriate competencies to complete the
audit (this seems likely given that the firm has other clients in this sector);
Other procedures
The firm should:
(v) seek the directors’ permission to communicate with the company
accountant about the nature of the ‘disagreement’ and the directors should
authorise the accountant to co-operate with the firm;
ANSWERS TO CASE STUDIES AND EXAMINATION QUESTIONS
Millichamp and Taylor, Auditing, 10th edition
© Cengage Learning 2012
43
(b) Starting the audit
It is inappropriate to start the audit before the procedures referred to above
have been completed because:
(i) without the staff with appropriate competencies the firm will be in breach
of the Rules (and may be found negligent if things were to go wrong);
ANSWERS TO CASE STUDIES AND EXAMINATION QUESTIONS
Millichamp and Taylor, Auditing, 10th edition
© Cengage Learning 2012
44
(c) Engagement letter
The engagement letter is of benefit to both the client and auditor and helps
prevent misunderstandings. It:
(i) confirms the auditor’s acceptance of appointment and constitutes a
contract between the auditor and the client;
(ii) summarises the respective responsibilities of directors and auditors;