Audit Engagement Acceptance Form (for new clients) Form completed by: Form reviewed by:

Transcription

1 Form AP 1 Index Reference Audit Engagement Acceptance Form (for new clients) Legal Company Name of Prospective Client: Balance Sheet Date: Form completed by: Form reviewed by: Date: Date: Instructions: This form should be completed for all potential new audit clients before the audit engagement is accepted. This form provides useful guidance but does not necessarily include all of the factors that might be considered in determined whether to accept a new audit client. Before a new client is accepted, appropriate information should be gathered and evaluated as a basis for deciding whether to accept the client. The exact amount and type of information needed for this purpose is a matter of judgment. A. General Information Regarding the Prospective Client 1. Business Address: 2. Telephone Number: Fax #: 3. Address: 4. Owner/manager other important officers of prospective client (names and titles): 5. Type of legal entity: 6. Nature of business of prospective client (including information regarding any specialized industry accounting and/or regulatory reporting requirements):

2 7. Previous Auditor: Name of firm: Name of director: Telephone number: 8. How was initial contact made with prospective client? 9. What reasons did the prospective client give for seeking a change in auditors? 10. What services does the prospective client want (audit of financial statements, preparation of tax information, etc)? B. Predecessor Auditor Questions 1-2 are based on discussions with the prospective client. 1. Has the prospective client had disputes with the predecessor auditor regarding accounting principles, audit adjustments or other significant matters? 2. Has the prospective client refused to give us written permission to communicate with the predecessor auditor and review his/her work? Questions 3 8 are based on discussions with the predecessor auditor. 3. Has the predecessor auditor had disputes with the client regarding accounting principles, audit adjustments or other significant matters? 4. Has the client prevented the predecessor

3 auditor from applying necessary auditing procedures? 5. Does the predecessor auditor have reason to doubt management s integrity? 6. Are there unresolved fee disputes between the client and predecessor auditor? 7. Has the predecessor auditor had any communications with the client regarding fraud, illegal acts, or significant deficiencies in internal controls? 8. Will the predecessor auditor place any significant restrictions on us in reviewing his/her documentation for the prior year audit? C. Information Regarding Management 1. Has information come to our attention (through the press, legal proceedings, etc.) that calls into question the integrity of management? 2. Is the company having difficulty meeting financial obligations, or have operations deteriorated recently? 3. Is there any basis for concern that management might be prone to taking unnecessary or extraordinary business risks? 4. Has there been a high degree of turnover at the management level in the company? 5. Has the prospective client suggested any restrictions on the scope of the audit that might make it impossible to express an unqualified opinion on the financial statements? D. Timing of Work and Use of Audited Financial Statements 1. Is there a deadline for delivery of the audited financial statements? 2. Does the timing of any audit work make it impossible to apply auditing procedures considered necessary? 3. Will the audited financial statements be needed to meet credit requirements,

4 reporting to regulators (i.e., Central Bank, Stock Exchange, etc.), or other contractual requirements? 4. Is a sale of all or part of the client s business anticipated, such that third parties might rely on the audit report for this purpose? E. Financial Reporting System and Controls (Explain all no answers. Attach additional sheets if necessary.) 1. Does the financial reporting system provide accounting records that support transactions that have occurred? 2. Are the accounting and control records sufficient to allow the application of audit procedures? 3. Is there at least minimum evidence of a control system (such as control totals, sequentially pre-numbered documents, reconciliation of subsidiary records, etc)? F. Independence and Ethical Considerations 1. Do any audit firm personnel have a direct or indirect financial interest in the company? 2. Are any of the audit firm personnel associated with the company as an employee, manager, Representative Governing Board, etc? 3. Will this audit engagement require professional competence in specialized areas in which we are not qualified? 4. Is there any concern regarding potential independence or other ethical issues, in accordance with The Code of Ethics of Certified Public Accountants of Mongolia? G. Cost/Benefit Analysis

5 The benefits of accepting a prospective new client must be weighed against the risk that the auditor accepts in performing the audit. The following risk factors should be considered: Is the company involved in significant litigation? Is the company required to file audited financial statements with a regulatory body, such as the Central Bank or the Stock Exchange? Does the company have significant related party transactions? Does the prospective client have the ability to pay for auditing services in accordance with the audit firm s normal billing rates? Does the company have a history of fraud or illegal activities? Does management understand the nature of the audit services to be performed and the inherent limitations of any audit of financial statements? Comments: H. Conclusion We should accept or not accept the audit engagement. Executive Director Concurring Director (if required) Date Date