Auditors evaluate whether to accept a new client or continue servicing an existing one by assessing key factors that influence the audit’s risk and feasibility.
Auditors examine the client’s ethical practices, financial stability, and reputation to identify potential risks associated with the engagement. This assessment safeguards the audit firm from reputational and operational risks.
Auditors obtain client permission to communicate with the predecessor auditor. This step allows for the evaluation of management integrity, past disagreements, and reasons for changes in auditors. Insights from these discussions help assess the risks associated with the client.
The firm ensures it has the necessary expertise and resources to handle the engagement effectively. Aligning the client’s risk profile with the firm’s risk tolerance is critical to minimizing audit risk.
Auditors confirm compliance with professional standards to ensure objectivity and uphold the integrity of the audit.
Auditors verify their independence in accordance with standards such as the AICPA Code of Professional Conduct. This includes reviewing personal, financial, and business relationships with the client to avoid conflicts of interest.
Ethical guidelines are reviewed to maintain high standards of professionalism and ensure the reliability of the audit process.
Clear communication and documentation of the audit’s scope and responsibilities are achieved through formal agreements, providing transparency and alignment.
The engagement letter specifies the audit's scope, objectives, and limitations. It outlines key details such as:
- Roles and responsibilities of the auditor and the client.
- Expected deliverables, fees, and timelines.
The letter emphasizes management’s duty to provide accurate financial records and disclosures while outlining the auditor’s role in performing procedures to obtain reasonable assurance about the financial statements.