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600.2 Pre-engagement activities involve consideration of the auditor's ability
- and desire to propose for, accept,
- or retain a particular CIRA engagement, including the auditor's
- independence and technical expertise; management's integrity; and the
- scope of the audit. Pre-engagement activities also include communicating
- with the predecessor auditor, if there is one, and establishing the
- terms of the engagement.
600.3 Planning activities include obtaining an understanding
- of the CIRA and its environment,
- including the particular CIRA's activities, internal control, and
- factors, including fraud, that affect the risk of material misstatements
- in its financial statements
600.4 Pre-engagement Activities
The authoritative pronouncements that establish requirements or
provide guidance that most directly affects pre-engagement activities
are as follows:
- a. SAS No. 84 (AU 315), Communications Between Predecessor and Successor Auditors,
- establishes the required communications that should occur prior to
- client acceptance when a change of auditors has taken place.b. SAS No. 108 (AU 311), Planning and Supervision,
- provides requirements relating to client acceptance and continuance and
- establishing an understanding with the client, including the issuance
- of a written engagement letter.c. Statement on Quality Control Standards (SQCS) No. 7 (QC 10), A Firm's System of Quality Control,
- describes the quality control policies and procedures, including those
- that pertain to client acceptance and continuance, that a member firm's
- quality control system should encompass.d. Interpretation 101-3 (ET 101-3), Performance of Nonattest Services, of the AICPA's Code of Professional Conduct, provides guidance regarding an auditor's independence in relationship to an attest client when performing nonattest services.
In addition to the items listed, auditors need to comply with other ethical requirements
of the AICPA's Code of Professional Conduct when considering whether an engagement can be accepted or continued.
600.5 Preliminary Planning
The authoritative pronouncements that establish requirements and
provide guidance that affect preliminary audit planning are as follows:
- a. SAS No. 107 (AU 312), Audit Risk and Materiality in Conducting an Audit,
- requires auditors to consider audit risk and determine and document
- materiality for the financial statements as a whole, as well as
- tolerable misstatement, when planning the audit.b. SAS No. 108 (AU 311), Planning and Supervision,
- addresses planning the audit, including topics such as establishing an
- overall audit strategy, developing the audit plan, determining the
- extent of the audit plan, involvement of professionals with specialized
- skills, supervision of assistants, communication with management and
- those charged with governance, and considerations in initial audits. c. SAS No. 109 (AU 314), Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement,
- establishes the level of understanding of the entity and its
- environment, including its internal control, the auditor should obtain
- for preliminary planning purposes. That standard also addresses risk
- assessment procedures and assessing the risks of material misstatement.d. SAS No. 110 (AU 318), Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained, explains the factors that affect a decision to apply substantive procedures before the financial statement date.
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