Initial Audit Engagement is an engagement where the financial statements of the previous period are not audited or the financial statements of the previous period were audited by a predecessor auditor. Opening balances are the account balances existing in the beginning of the period.
Full Answer
What are the steps of the audit engagement?
What are the steps of the audit engagement?
- Audit notification
- Request for documentation
- Preparing an dudit plan
- Scheduling for opening meeting
- Conducting the audit
- Documenting a report
- Closing meeting
- Follow up and closure of action plan
When does an auditor withdraw from an engagement?
Withdrawal is generally necessary when a situation arises post-engagement where the auditor’s independence or objectivity could reasonably be questioned. Examples: Inappropriate personal relationship between audit partner and client officer or accounting personnel.
What are the contents of the audit engagement letter?
They should include the following:
- The objective and scope of the audit;
- The responsibilities of the auditor;
- The responsibilities of management;
- The identification of an applicable financial reporting framework; and
- Reference to the expected form and content of any reports to be issued.
What is an attestation engagement audit?
Attestation engagements are a familiar form of assurance engagement, as audits and reviews of financial statements have been structured as attestation engagements: management reports the financial performance and position in the annual accounts, asserts the information as being true and fair, and the practitioner gives a conclusion on the ...
What is initial audit engagement?
Initial audit engagement – definition. An engagement in which either: The financial statements for the prior period were not audited; or. The financial statements for the prior period were audited by a predecessor auditor.
What is the objective of an auditor with respect to opening balances?
In conducting an initial audit engagement, the objective of the auditor with respect to opening balances is to obtain sufficient appropriate audit evidence about whether. Opening balances contain misstatements that materially affect the current period’s financial statements; and.
What is relevant information in the Predecessor Auditor’s Report?
Relevant Information in the Predecessor Auditor’s Report If the prior period’s financial statements were audited by a predecessor auditor and there was a modification to the opinion, the auditor shall evaluate the effect of the matter giving rise to the modification in assessing the risks of material misstatement in the current period’s financial statements in accordance with ISA 315 (Revised) Audit Conclusions and Reporting
When does ISA 7101 apply?
When the financial statements include comparative financial information, the requirements and guidance in ISA 7101 also apply. ISA 3002 includes additional requirements and guidance regarding activities prior to starting an initial audit.
What is appropriate accounting policy?
Appropriate accounting policies reflected in the opening balances have been consistently applied in the current period’s financial statements, or changes thereto are appropriately accounted for and adequately presented and disclosed in accordance with the applicable financial reporting framework.
What is the purpose of reviewing the predecessor auditor’s working papers?
Review the predecessor auditor’s working papers to obtain evidence regarding the opening balances.
What is ISA 510?
ISA 510 deals with the auditor’s responsibilities relating to opening balances in an initial audit engagement.
Audit procedures for opening balances
When a new audit client is engaged, the auditor must obtain a copy of the most recent financial statements, if any, together with the predecessor auditor’s report on those financial statements. The auditor should then read these financial statements to obtain applicable information which is relevant to the opening balances (including disclosures).
Audit evidence on opening balances
Fixed assets and long-term liabilities: The auditor can obtain some audit evidence in relation to fixed assets and liabilities by a review of the client’s accounting records. For example, in relation to fixed assets, invoices may be available to support the cost price of fixed assets.
Access to working papers
Companies Act 2006 (CA 2006), Sch. 10 requires that the recognised supervisory bodies must have adequate rules and practices designed to ensure that a person ceasing to hold office as a statutory auditor makes available to his successor in that office all relevant information which they hold in relation to that office. ( CA 2006, Sch.
What are the elements of the Audit Engagement Letter?
There are several elements that each audit engagement letter must include. This requirement comes from ISA 210 Agreeing with the Terms of Audit Engagements. These include the following.
What is the purpose of an audit?
An audit requires auditors to establish suitable criteria against which they can check the financial statements.
What is an Engagement Letter?
An engagement letter is a written agreement used by two parties to enter into a business relationship. One party in this relationship is the client that obtains products or services, while the other party is a supplier. Through an engagement letter, both parties can specify the terms for their relationship. These terms may include the costs, timing, and scope of the agreement.
What is the basis on which the fees are calculated?
The basis on which the fees are calculated. Agreement of management to notify the auditor of subsequent events after the auditor’s report is signed. Agreement of management indicat ing the provision of the draft financial statements in time to allow the audit to be completed by the deadline.
