Syllabus C. Practice Management C3. Professional appointments

C3a. New engagement process 2 / 3

Syllabus C3a)

Explain the matters to be considered and the procedures that an audit firm/professional accountant should carry out before accepting a specified new client/engagement including:

. i)  client acceptance 
. ii)  engagement acceptance 
. iii)  establish whether the preconditions for an audit are present 
. iv)  agreeing the terms of engagement. 

The following procedures should be undertaken if an auditor is offered an audit role:

  1. The client should be asked for permission to contact the outgoing auditor. (If not given– refuse the position)

  2. Contact the outgoing auditor to ask if there is any professional reason not to take the role.

  3. Ensure process of appointment and resignation of previous auditor was carried out correctly.

  4. Check we are sufficiently Independent

  5. Ensure that the audit firm is properly qualified to act for the client (Legality / Ethics).

  6. Undertake risk assessment of the firm.

  7. Ensure that the audit firm has adequate resources to conduct the audit.

  8. Consider size of client, business area etc and how this will affect the audit.

  9. What level of fees will be provided – is it worth it?  Does it make up more fees % than allowed?

Tendering for audit work

Things to consider...

  1. Fee

    • A fee will be quoted for a piece of audit work before it is carried out under a tendering process

    • The auditor must not lowball as we have seen above, nor may they make unrealistic claims or promises to win the contract

  2. Get Information

    • The potential client will inform the auditor of what is expected, the timetable, future plans of the company and any problems with current auditor

  3. Proposal

    The auditor may then draw up a proposal containing:

    • Proposed audit fee

    • Nature, purpose and legal requirements of an audit.

    • Assessment of the requirements of the client.

    • How audit firm proposes to satisfy requirements

    • Any assumptions made.

    • Proposed audit methodology.

    • Outline of audit firm and personnel

    • Ability of firm to perform the audit


  • Is the Financial framework used acceptable? (Consider the type of business and relevant laws and the uses of the financial statements)

Client Decision

  • The client will decide on the basis of clarity, relevance, professionalism, reputation, timeliness of delivery and originality which firm will conduct the audit