Beruflich Dokumente
Kultur Dokumente
BBF
CASES:
1. REQUIRED:
a. What information should Argante and Tan have obtained during their
inquiry of the predecessor auditor prior to acceptance of the
engagement?
Once permission of the client is obtained, the incoming auditor should inquire
into matters that may affect the decision to accept the engagement. This
includes the questions regarding:
The predecessor auditors understanding as to the reasons for the
change of the auditors.
Any disagreement between the predecessor auditor and the client
Any facts that might have a bearing on the integrity of the prospective
clients management.
Any other information that may help auditor in deciding whether
accepting or not the engagement
b. Describe what other matters Argante &Tan would generally have
included in the engagement letter.
The agreed terms of the audit engagement shall be recorded in an audit
engagement letter or other suitable form of written arrangement and shall
include:
The objective and scope of the audit of the financial statements
The responsibilities of the auditor
The responsibilities of the management
Identification of the applicable financial reporting framework for the
preparation of the financial statements; and
Reference to the expected form and content of any reports to be
issued by the auditor and a statement that there may be circumstances
in which a report may differ from its expected form and content.
The fact that because of the limitations of the audit, there is an
unavoidable risk that material misstatements may remain
undiscovered.
The responsibility of the client to allow the auditor to have unrestricted
access to whatever records, documentation and other information
requested in connection with the audit.
In addition, the auditor may also include the following items in the
engagement letter
Billing arrangements
Expectations of receiving management representation letter
Arrangements concerning involvement of others
2. REQUIRED:
a. List the items that should be included in the typical engagement letter.
The name and address of the person or persons who retained the
auditor to perform the auditing services.
An opening paragraph that confirms the understanding of the auditor
and the client.
A summary of significant events that lead to the retention of the
services of the auditor.
A general description of the CPA firm that will conduct the examination.
A statement that the examination will be performed in accordance with
generally accepted auditing standards.
A description of the scope of the services to be rendered, which should
establish the nature of the engagement.
Any scope restrictions or special limitations and their effect on the
auditors report.
A statement regarding the auditors responsibility for the detection of
fraud.
An indication of the possible use of client personnel in connection with
the audit work to be performed.
A statement that the auditor will provide a management letter if
required in the circumstances.
The method and timing of billings as well as billing rates and fee
arrangements.
Space for the client representatives signature, which indicates
acceptance of the letter and the understandings, therein
b. Describe the benefits derived from preparing an engagement letter.
Preparation of engagement letter is part of the preliminary engagement
activities which should be performed at the beginning of the current audit
engagement to help ensure that the auditor has considered any events or
circumstances that may adversely affect the auditors ability to plan and
perform the audit engagement to reduce audit risk to an acceptably low level.
It also helps to prevent misunderstanding that may occur between auditor and
client. And also to ensure that there are no issues with management integrity
that may affect auditors willingness to continue the engagement. It also