This will involve the auditor in the following activities: an assessment of the risks attaching to the business an assessment of the adequacy of the internal controls obtaining evidence to confirm the assertions embodied in the financial statements designing procedures so that there is a reasonable expectation of detecting material errors arising from fraud, and considering whether the entity is a going concern.
A non audit assignment will not involve these activities.
the auditor requires this understanding to be able to make relevant enquiries and to design appropriate procedures, as well as to assess the responses and other information obtained.
Work Performed by Others when using work performed by another auditor or an expert, the auditor should be satisfied that such work is adequate for the purposes of the review.
it is in the interests of both the auditor and the client that the auditor send an engagement letter documenting the key terms of the appointment.
an engagement letter confirms the auditor’s acceptance of the appointment and helps avoid misunderstanding regarding such matters as the objectives and scope of the engagement, the extent of the auditor’s responsibilities and the form of reports to be issued.
This is expressed in the form of negative assurance.
the auditor and the client should agree on the terms of the engagement.
To emphasise this point and to avoid confusion, the auditor may also consider pointing out that a review engagement will not satisfy any statutory or third party requirements for an audit.
Planning the auditor should plan the work so that an effective engagement will be performed.
ACCA P7 lectures Download P7 notes Audit firms are often asked to provide services to clients which do not involve the expression of an opinion on the truth and fairness of the financial statements.