1. AUDIT AND ASSURANCE LECTURE 4 HOLY KPORTORGBI LGIMPA BUSINESS SCHOOL

2. OBTAINING AND ACCEPTING PROFESSIONAL APPOINTMENTS
LECTURE 4
OBTAINING AND ACCEPTING PROFESSIONAL APPOINTMENTS

3. Content Why companies change auditors Advertising and fees Tendering
Acceptance
Terms of engagement

4. Change in Auditors Companies change auditors for the ff reasons
Audit fees (too high; not competitive)
Auditor not seeking reelection
Size (expand beyond audit firm’s capacity)
Personality (disagreement with audit staff)
Auditor not seeking re-election(ethical reasons, disagreement with client)
Audit rotation

5. Advertising and fees
The general rule is that medium of advertising shall not reflect adversely on the professional accountant’ ICAG or the accountancy profession
This means advertising of service is allowed to the extent that it does not show desperation or brings low the reputation of the profession

6. Advertising and fees It is inappropriate to advertise fees
Three issues that arise in relation to fees are
Referring to fees in promotional materials
Commissions
Setting and negotiating fees
Great care should be taken not to mislead potential clients
See page105

7. Tendering
When approaching a tender, it is important to consider both fees and practical issues
Fees
cope of work, staff requirement and other resource needs
The firm must guard against lowballing as it could affect auditor independence
Extremely high fees as it could be interpreted as a guarantee for unqualified report

8. Tendering Practical issues Proposed timetable and fit
Availability of personnel for the audit
Specialists needed?
First time audit?
Client expectation
Future potential and prospects of the client

9. Content of an audit Proposal
No fixed content as it is largely client specific
Minimum issues, however are
A brief profile of the audit firm
Key staff that will be involved
Assessment of the needs of the prospective client
Outline of how the audit firm intends to meet those needs
Proposed approach to the engagement
The fees and how they are determined

10. Client Acceptance
The auditor must consider both ethical and practical issues before accepting an audit engagement
Key among these requirements
Professional qualification
Resource adequacy
References of the prospective client directors and key contacts
Professional courtesy

11. Client Acceptance After accepting the nomination the auditor should:
Ensure outgoing auditors removal or resignation is properly conducted
Ensure the new auditor’s appointment is valid
Set up and submit a letter of engagement
Page 110

12. Terms of Engagement ISA 210
ISA 210 requires of the auditor to accept or continue an audit engagement only when the basis of performance has been agreed with the client
Establishing pre condition of the audit (suitable reporting framework, internal controls, and availability of information)
Confirming there is common understanding between the auditor and management (or persons charged with governance)

13. Terms of Engagement ISA 210
The Audit engagement letter serves as the legal evidence of this agreement
The Audit engagement letter is issued by the auditor immediately after the auditor accepts nomination as the auditor elect

14. Terms of Engagement ISA 210
The engagement letter shall clarify the following issues
Objective and scope of the engagement
Auditors responsibility
Management responsibility
Applicable financial reporting framework
Expected form and content of reports to be issued by the auditor
Other issues: fees, form of audit communications, internal controls etc

15. See sample audit engagement letter

16. THANKS