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Q) Which of the following statements is TRUE in relation to Flute Co being a new audit client of Woodwind & Co?
1) Inherent risk is increased as the firm has no cumulative knowledge or experience of Flute Co.
2) The auditor may not be competent to perform the audit and should consider resigning.
3) The auditor should contact the previous auditor to ask if there are any professional matters of which they should be aware.
4) The auditor will need to increase the quality management procedures performed due to the increased risk. ?
Hello tutor!!
I choose option 3 which is wrong because I thought auditor might contact with previous auditor to get some prior working papers of new client but they are saying something new in option 4 which I am not understanding.
Could you please explain me what are they saying in option 4 and furthermore why option 4 is correct ?
Thank you.3. is incorrect – Flute would only be an audit client AFTER professional enquiry and ensuring that the preconditions of an audit are met – if not done, now would be too late (!)
4. is the best available answer (dismissing 1 and 2 as incorrect):
New clients introduce higher risk (e.g. lack of historical knowledge, unknown management integrity, unfamiliar systems). The firm’s quality management system (ISQM 1 / ISA 220) requires heightened procedures for riskier engagements, including more robust planning, review, supervision, and possibly assigning more experienced staff.
You say they are saying “something new” – presumably the topic of quality management comes later in Kaplan’s materials (I don’t know – I don’t have).
When you’re ready for revision question practice I recommend the OT cases in the Study Hub – they are clearly identified in the Practice section https://www.accaglobal.com/uk/en/student/your-study-options/studyhub.html
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