ACCA AAA · Chapter 3
Professional appointments
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Acceptance and audit terms
Before appointment integrity, ability, ethics and terms
Client or engagement?
- Client acceptance: establish a professional relationship
- Engagement acceptance: undertake this particular service
Applies to
- New clients, new services for existing clients and continuance
Core decision
- Client association and ethical compliance acceptable?
- Can firm meet standards with competence, time and resources?
- Are purpose, scope and terms clear?
Quality management
- Obtain evidence, evaluate concerns and document approval
Client
- Business, ownership, governance and management integrity
- Purpose, intended users and reason for appointment/change
- Fraud, NOCLAR, money laundering or adviser disputes
Engagement
- Scope, standards, deadline, report and access
- Complexity and need for experts or specialists
Resources and ethics
- Competent staff, technology, time, supervision and review
- Independence, conflicts, fees and client relationships
Evidence sources
- Management/TCWG, CDD, public records and third parties
Why enquire?
- Predecessor may know disputes, restrictions or integrity concerns
- Ask about suspected fraud/NOCLAR and reasons for change
Professional enquiry
- Communicate with existing accountant with client permission
- Evaluate and corroborate information where necessary
Own decision remains
- Predecessor information informs the decision
- Firm still performs its own acceptance procedures
Exam application
- Explain how the information affects risk and acceptance
Sequence
- Client permission → Professional enquiry → Existing accountant’s response → Evaluation and enquiries → Acceptance decision
Acceptable framework
- Determine whether reporting framework is acceptable
Management acknowledges
- Preparation of financial statements
- Internal control for statements free from material misstatement
- All relevant information, additional requested information
- Unrestricted access to persons for audit evidence
If absent
- Discuss with management; ordinarily decline unless law requires
Pre-acceptance scope limit
- Decline if likely to cause disclaimer, unless law requires
Terms, continuance and other services
Supported decision accept, resolve conditions or decline
Written agreement
- Agree terms with management or TCWG
- Use engagement letter or other suitable written agreement
Principal terms
- Objective/scope, auditor and management responsibilities
- Reporting framework, expected report form/content
- State that circumstances may change the expected report
Practical matters
- Timetable, specialists, access, communications and fees
Purpose
- Reduce misunderstanding and define the agreed service
Recurring audits
- Letter need not be renewed annually
- Reconsider after misunderstanding or change in management
- Review changes to activities, law, framework or terms
Requested change
- Agree only if reasonably justified; record revised terms
- Avoiding a modified opinion is not justification
If original audit cannot continue
- Withdraw where permitted and consider reporting duties
Stay alert
- New facts that would have affected initial acceptance
- Management integrity, risk, law, ethics and resources
Access and capability
- Assess access to evidence after restrictions or disputes
- Assess whether effective communication is possible
Respond
- Resolve concern or consider discontinuing engagement/client
- Withdrawal may require statutory notifications or reports
Example
- Specialist acquisition requires expertise and time
- Reconsider continuance if resources or access are unavailable
Internal audit/non-audit service
- Purpose, users, scope, responsibilities and standards
- Information, skills, time, resources and ethical compatibility
Complementary work
- With permission, contact other accountant about scope
- and professional concerns; consider any refusal
Conclude clearly
- Accept/continue or specify conditions for acceptance
- Decline/discontinue if concerns cannot be resolved
Exam application
- Link each concern to scenario facts and a supported decision
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