Assurance

Professional Stage: Knowledge level

Process of Assurance: Obtaining an Engagement (Chapter- !"
#$ %hat matters to be considered before accepting an engagement&
(i) The present and proposed auditors should normally communicate about the client
prior to the audit being accepted;
(ii) The client must be asked to give permission for communication to occur; and
(iii) The auditors must ensure that they have sufficient resources to carry out the
appointment.
!$ %hat is the appointment consideration for engagement as per Schedule C of 'CA( Code
of Ethics as well as ')AC Code of Ethics&
As per Schedule C of ICA Code of !thics as "ell as I#AC Code of !thics$ before accepting a
ne" audit client$ the auditors must ensure that there is no independence or other ethical issues
likely to cause significant problems "ith the ethical code.
#urthermore$ ne" auditors should ensure that they have been appointed in a proper and legal
manner.
The nominee auditors must carry out the follo"ing procedures%
(i) !nsure professionally &ualified to act;
(ii) !nsure e'isting resources are ade&uate;
(iii) (btain references; and
(iv) Communicate "ith present auditors.
*$ +ow will ,ou determine the low ris- and high ris- clients&
.ow ris- clients
a. )ood long term prospects
b. *ell+financed
c. Strong internal controls
d. Conservative prudent
e. Accounting policies
f. Competent$ honest management
g. #e" unusual transactions.
+igh ris- clients
a.,oor recent forecast performance
b. -ikely to have lack of
finance
c. Significance control$ "eaknesses
d. .oubtful accounting
policies
e.-ack of finance director
f. Significant une'plained transaction or
transaction "ith connected companies.
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/$ %hat ma, be the sources of information about new client&
The follo"ings are the sources of information about ne" client%
En0uiries of other source+ These may be ankers and Solicitors;
1eview of documents+ /ost recent annual accounts$ listing particulars$ credit rating;
Previous accountants and auditors+ ,revious auditors should be invited to disclose
fully call relevant information; and
1eview of rules and standards+ Consider specific la"s and standards that relate to
industry.
2$ %hat procedures should be carried out after accepting nomination&
The follo"ing procedures should be carried out after accepting the nomination%
!nsure that the outgoing auditors removed or resignation has been properly conducted in
accordance "ith national legislation;
!nsure that the auditor0s appointment is valid; and
Set up and submit a letter of engagement to the client.
3$ %hat is an engagement letter& %hat are the ob4ectives of it&
Engagement letter
An engagement letter documents and confirms the auditor0s acceptance of the appointment$ the
ob1ective and scope of the audit$ the e'tent of the auditor0s responsibilities to the client$ and the
form of any report.
5he ob4ective of an engagement letter is to:
.efine clearly the e'tent of the firm0s responsibilities and so minimi2e the possibility of
any misunderstanding bet"een the client and the firm;
,rovide "ritten confirmation of the firm0s acceptance of the appointment the scope of
the engagement and the form of their report.
6$ %hat are the form and remaining content of audit engagement letter&
The form and content of audit engagement letter may very for each client but they "ould
generally include the follo"ings%
The ob1ective of the audit;
/anagement0s responsibility;
The scope of the audit;
The form of any report;
3nrestricted access to "hatever records and documents; and
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Inherent limitation and unavoidable risk that may remain undiscovered
The auditor may also "ish to include the follo"ings%
,lanning of the audit;
*ritten confirmation of management representations;
Ackno"ledge receipt of the engagement letter;
Any other reports that the auditor e'pects to issue;
asic of computing fees; and
A reference to any further agreements bet"een the auditor and the client.
7$ %hen should it be appropriate to send a new letter&
(n recurring audits$ the auditor should consider "hether the terms of the engagement to be
revised or need to remind the client of the e'iting terms of engagement.
The auditor may not re&uire to send a ne" engagement letter each period.
4o"ever$ the follo"ing may make it appropriate to send a ne" letter%
Any misunderstanding I respect of ob1ective and scope;
Any revise or special terms;
Change of senior management;
Any change in nature or si2e of the client0s business; and
-egal re&uirement.
8$ 9raft an engagement letter$
5o the (oard of directors or the appropriate representative of senior management
5ou have re&uested that "e audit the financial statement of AC Co. -td. *hich companies the
balance sheet as at dd6mm6yy$ and the profit and loss account$ statement for the year then
ended. *e are pleased to confirm our acceptance and our understanding of this engagement by
means of this letter. (ur audit "ill be made the ob1ective of our e'pressing an opinion of the
financial statement.
1esponsibilities of directors and auditors
As directors of AC Co. -td. you are responsible for ensuring that the company maintains
proper accounting records and for preparing financial statement "hich give a true and fair vie"
and have been prepared in accordance "ith the companies Act. 7889. 5ou are also responsible
for making available to us all records.
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*e have a statutory responsibility to report to the members "hether in our opinion the financial
statements give a true and fair vie"$ "hether they have been properly prepared in accordance
"ith the Companies Act. 7889.
Scope of audit
(ur audit "ill be conducted in accordance "ith the angladesh Standard on Auditing and "ill
include such test of transactions and of the e'istence$ o"nership and valuation of assets and
liability for as "e consider necessary.
The responsibility for safeguarding the as sets of the company and for the prevention and
detection of guard and error and noncompliance "ith la" or regulations rests "ith yourselves
This letter "ill be effective for future years unless it is terminated amended or superseded.
,lease sign and return the attached copy of this letter to indicate that it is in accordance "ith
your understanding of this arrangement for our audit of the financial statements$

:;< Co$
Ackno"ledge on behalf of
A(C Co$ .td$ b,
(Sign)
:ame$ Title ; .ate
5he End

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