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Preconditions for an audit

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › Preconditions for an audit

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  • January 15, 2023 at 6:22 pm #675490
    alawi sayed
    Participant
    • Topics: 174
    • Replies: 197
    • ☆☆☆

    Hello Sir,

    I want to create a distinction between the preconditions for an audit and conditions before you say yes to an audit engagement as the following points say:

    Auditors must exercise great caution if asked to be the auditors of an organisation.
    ?
    Are they professionally qualified to act? Is it legal and ethical for them to do so? For example,
    they shouldn’t accept an appointment if the fees exceed the 15% limit for public interest
    companies, unless there are adequate safeguards.
    ?
    Do they have adequate resources in terms of staff, time, and expertise? If the potential audit
    client acts in a specialist area of business and the auditors have no prior experience of that, it
    would be very unwise for them to accept the appointment.
    ?
    Investigate the client, its management, and directors. Many firms of auditors have access to
    databases which, for example, will allow them to search on directors’ names to see if any of the
    directors have been banned from being directors of companies because of their past behaviour.
    They may discover that it is too risky to become the auditor of a company if they have no trust in
    the honesty of the directors. The audit fee is often modest, why risk your reputation by
    undertaking an audit where the directors may be fraudulent?
    ?
    Communicate with present auditors. There is a professional requirement to do this and it is
    essential to find out why the old auditors are retiring or being removed.

    The above conditions have some aspects of the preconditions for the audit

    but as we know the preconditions for an audit as the notes says:

    The preconditions for an audit are that management acknowledges and
    understands its responsibility for:
    ?
    Preparation of the financial statements in accordance with the applicable
    financial reporting framework.
    ?
    Internal control necessary for the financial statements to give a true and
    fair view.
    ?
    Providing the auditor with access to all relevant information and
    explanations.

    So how can we differentiate between the two conditions :

    Can you please clarify sir,

    Thanks

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