Preliminary audit engagement activities_2023

Transcript

00:04

Hi there! 

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Today we will have  a closer look at  preliminary audit  engagement activities.

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The preliminary audit engagement stage consists of 5 activities

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Remember

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During these activities you need to consider certain aspects as prescribed in ISA 210, ISA 220, ISA 300 and ISQM 1

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Activities 1 and 2

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Establish the pre-conditions of an audit and Investigate prospective or existing clients

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Examples

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Consider the Financial Reporting Framework.

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Management's under- standing of their responsibility.

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No limitation on scope. Unrestricted access. Integrity and business reputation.

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Activity  2

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Audit firm's skills,  competence and resources

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Includes: 1. Do they have enough time and resources (personnel)? 2. Do they have the capabilities i.e knowledge? 3. Are experts needed? 4. Compatible IT systems?

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Activity  3

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Audit firm's compliance with statutory and ethical  requirements

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For example: Compliance with Companies Act and APA, Evaluate independence, Consider the fundamental principles of CPC, threats and safeguards thereto.

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But wait! There is more!

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Before establishing the Terms of the Engagement in Activity 5, did you also consider the following as part of the other activities:

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Do you have permission to contact the previous auditor? Was there any significant  matters from the previous audit? 

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- Does the removal and appointment of auditors comply with the Companies Act?

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- Did they resign due to professional reasons?

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- Will the audit client be able to pay the audit fee?

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As a last activity, determine the Terms of the en- gagement in Activity 5

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Decide    

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Whether or not you should accept the audit client.

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If YES

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Prepare the audit engagement letter

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The END