02.Engagement P II

7/31/2019 02.Engagement P II

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Engagement1Basic Principals (governing an audit)

Compliance with CoECompliance with BSAs/ISAsProfessional Skepticism1Elements of Assurance Engagement3Party: Responsible, Practitioner, User of FR

Subject MatterSuitable CriteriaSAAEWritten Report

2Engagement Terms must cover


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Engagement will need to be-Planned

PerformedConcluded uponReported onTime Frame95Term of audit engagement covers

Scope of EnggSubject matter of EnggCriteria of Subject matter judgmentLevel of assurance given & opinion to be given

Timings Associates with engg


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Any Restriction in liabilityFees & billing arrangements

98Terms of change of engagementAuditor & client must come in agreementIF they cant agree, withdraw engagement2Firm ConsiderationsRL + Tenor of Relationship

+ Conflct^Int + Resource3Pre Accept ProcedureProf. QualificationRecources Needed

X-Adtr Commu


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Ref. Collection (About Client)4Steps of Engg. Acceptance

Client IntimationMgt Integrity EvaluIdentify Special Circumstances & Unusual circumstan

Assess Competence to perform auditEvaluate independence

Determine ability to use due carePrepare Engagement Letter86Write Tendering ProcessGo with Bid Process

Several firms are invited to bid for the assignment


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Firms expose their attributes & chargesOne firm is given scope for doing the job

87Precondition for tenderQuality of the service prospectiveKnowledge of business processExperience in the industry levelProposed personnel on audit team

Ref. obtained about the audit firm5Entity Basic FactorsMgt Intg + Risk (AAC)6Risk Factors Analysis

Prospect + Fin + IC +


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A/c Policy + Mgt. Ctrl + Level-UTr.7Stage of New Engagement

X-adtr commu permission + Cient Agree collect + AESending + AEL Acknow8Types /Class of AuditLegal Envi -

Statutory n-Statutory

Activity TypesFSACompliance and ComprehensivePerformance or value-for-money audit

Social audit


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Internal AdtObjective-

FSACompliance and ComprehensiveOperational Audit

Affiliation -External vs Internal

Government audit9Post Accept ProcedureX-Adtr Proper RemovalValid Appointment

AEL Submit & Ack


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10BoA & WPCollect BoA + Collect Adt File

18Principal items to agree b4 enggAsk This Question to Class Teacher27What may let to limitation of scopeWhen auditor get MM due to FEAR which are not covin WMR, a limitation of scope arises

AEL96AEL coversObjective of Audit of FSMgt Resp. for FS

Scope of Audit


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Forms of Reports & CommunicationLimitations of Audit

Unrestricted access11AEL PurposeFirm Resp ^ Extnt + W. Confirmation12AEL ContentsGen _ Obj + Scop + Mgt. Res + Un-R Acess+ Inhere

LimitOpt _ adt pln + Adt Expec+Acknoledge+Fees & BillRelv _ Oth Adtr & Expart + Client Staff + Pred. Adtr E13General Contents of AEL

14Optional Content of AEL


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15Relevant Content of AEL16Previous adtr resigned- tell 3 reason for which

invited adtr should also decline engagement=Ask this question to teacher90Auditors consideration B4 accepting auditResult of Risk AnalysisEthical Barriers to accept

Whether firm has resources to undertake this assignmLegal Issues91IFAC code of ethics relation to pref. appointmeWith Prospective Auditor

With Existing Auditor


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Additional WorkRecurring & Principal Audit

97Terms for recurring audit_HTDExpert Engagement140When to use an expertOn Particular Matters which have affect on FS141Area of using an expert

Valuation of certain types of AssetsDetermination of Qnty or Physical condition of assetsDetermination of amounts using specialized methodsMeasurement of work completed and WIP

Legal Opinions


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142BSA guideline for using experts workAuditor would collect SAAE that need of an expert

Should assess professional competence(Prof. Qualification, Experience, Resources of ExpertCollect SAAE about expert work to proof his value foaudit

Assess appropriateness of experts work as audit evi

143Auditors consideration before using an experKnowledge and previous experienceRisk of Misstatement based on SNCx of matterQuantity & Quality of relevant AE

144Expers competence ensuring ways


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Professional CertificationExperience & reputation

145When experts service can be impairedEmployed by EntityRelated in some manner to the entityFinancially dependent or having investment with entit146Experts scope of work

Depends on matters as follows Objective & Scope of Experts workGeneral outline of coveringIntended use of experts work

Extent of Expert access


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Experts relationship with entityConfidentiality of Entity Info

Assumptions & Methodologies used by Expert147How to assess work of expertConsideration for assessing expert work-Source data used

Assumptions and methods used

When the expert carried out the workReason for any changes in assumptions and methodResults of Experts work

Documents

02.Engagement P II