ICPAK AUDIT MANUAL 5. AUDIT ENGAGEMENT (INCORPORATING ISQC 1, ISA 210 and ISA 220) 5.1. Client Acceptance ISQC 1 requires that prior to accepting an audit engagement, the firm should consider: > The integrity of the principal owners, key management and those charged with governance. > Whether the engagement team is competent to perform the audit engagement and has the necessary time and resources. > Whether the firm and the engagement team can comply with the ethical requirements which include integrity, objectivity, competence, confidentiality and professional behaviour. There must be evidence that the engagement partner has formed a conclusion on compliance with independence requirements including: · Identifying and evaluating circumstances that create threats to independence. · Evaluating identified breaches. . Taking action to eliminate threats or reduce them to an acceptable level by applying safeguards. In addition to the above consideration, engagements may need to be declined where: > An entity is operating in a specialised industry in which the auditor lacks the required expertise and expert assistance is not available. > An entity operates a significant branch network where the firm is not presented, and there are no alternative audit procedures that can be adopted to cover these branch operations. > The entity reporting deadlines coincide with existing client pressures. > A quality control review is required and no suitably qualified and objective reviewer is available. The information the firm obtains may come from: > Communication with previous or existing providers of professional accountancy services to the entity and discussions with other third parties. > Inquiry of other firm personnel or third parties such as bankers, legal counsel and industry peers. > Background searches of relevant databases. It is vital that the firm is not exposed to the risk of its reputation or future profitability by accepting new clients without proper vetting procedures. To adhere to the COE and in particular, the aspect of client confidentiality, the firm should inform the entity that it will seek information from certain persons as required by ISQC 1. Where issues arise out of any of these considerations, the engagement team should undertake appropriate consultation in accordance with Section 4 of this Manual. The Client Acceptance Questionnaire is set out as Form 5.03 in Part E of the Manual. This should be completed at the acceptance stage. It should then be completed at least once every five years to ensure that there are no new circumstances that have developed that could affect the continuation of the engagement. In addition to the ISQC requirements above, the firm should make sure that prior to accepting the appointment: > It has confirmed that the provisions of the Companies Act relating to appointment of auditors have been complied with by inspecting the appropriate minutes or resolutions. 5. Audit Engagement Version 1 - 9th October 2006 1 of 13
ICPAK AUDIT MANUAL 1 Where there is a change of auditors, then in accordance with the COE: . The entity has communicated with the outgoing auditor giving him the