Preliminary audit engagement activities_2023

Preliminary audit engagement activities_2023

Published on 24 January 2023

Intro to the first step of the audit process.

Transcript
00:04
Hi there! 
00:06
Today we will have  a closer look at  preliminary audit  engagement activities.
00:15
The preliminary audit engagement stage consists of 5 activities
00:22
Remember
00:23
During these activities you need to consider certain aspects as prescribed in ISA 210, ISA 220, ISA 300 and ISQM 1
00:30
Activities 1 and 2
00:32
Establish the pre-conditions of an audit and Investigate prospective or existing clients
00:35
Examples
00:35
Consider the Financial Reporting Framework.
00:37
Management's under- standing of their responsibility.
00:39
No limitation on scope. Unrestricted access. Integrity and business reputation.
00:45
Activity  2
00:45
Audit firm's skills,  competence and resources
00:51
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?
00:57
Activity  3
00:57
Audit firm's compliance with statutory and ethical  requirements
01:03
For example: Compliance with Companies Act and APA, Evaluate independence, Consider the fundamental principles of CPC, threats and safeguards thereto.
01:05
01:10
But wait! There is more!
01:11
Before establishing the Terms of the Engagement in Activity 5, did you also consider the following as part of the other activities:
01:16
Do you have permission to contact the previous auditor? Was there any significant  matters from the previous audit? 
01:23
- Does the removal and appointment of auditors comply with the Companies Act?
01:26
- Did they resign due to professional reasons?
01:29
- Will the audit client be able to pay the audit fee?
01:36
As a last activity, determine the Terms of the en- gagement in Activity 5
01:42
Decide    
01:42
Whether or not you should accept the audit client.
01:48
If YES
01:52
Prepare the audit engagement letter
01:55
The END