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Section 13 of ISA 300 Additional considerations in initial audit engagements, states that the auditor shall…(b) communicate with the predecessor auditor…prior to starting an initial audit.
My question is: Should we not seek professional clearance after we have been awarded an audit, which is after the tendering process and prior to final acceptance of the engagement?
With reference to Ted Co (6/15), the BPP exam kit mentions that since the audit has been accepted, matters related to professional clearance were not relevant. However, the question only states that following the tendering process, the audit has been awarded to the firm. I’m a bit confused here. Kindly advise.
ThanksYes – this is what it sales in the Code about changes in a professional appointment:
“A professional accountant in public practice who is asked to replace another
professional accountant in public practice, or who is considering tendering for an
engagement currently held by another professional accountant in public practice, shall
determine whether there are any reasons, professional or otherwise, for not accepting
the engagement, …”
So communication must be BEFORE acceptance (and withholding of permission to communicate would be grounds for not accepting).
In para 13 ISA 300 is simply saying that before an initial audit you have to have complied with ethical requirements – which, according to the code, should be before acceptance.I concur, if an engagement has been accepted you shouldn’t waste time on pre-acceptance considerations (which would include professional “clearance”).
Thank you for the clarifications.
So, at this stage in the audit process, and wrt professional clearance, I should rather suggest any matter which may have been flagged by the predecessor auditor in the PF letter (or from a review of his/her audit file, if available) that may indicate a possible audit risk. Will that be correct as a general risk issue, in case I’m short of any other specific risk.You shouldn’t be short of specific risks in the real exam – if you look at marking schemes for “evaluation” you should be writing a short para up to 3 sentences (for max 3 marks) – so for 20 mark requirement you only need identify 7 “good” risks for 100% of the marks available.
You should avoid pure invention/speculation as that just leads to digression and takes your mind away from visualising the specific scenario at hand.
Thank you for above clarifications.
I saw a post on Materiality – Matter vs misstatement and was thinking about the marking scheme.
Suppose that I wrongly calculated materiality (found something to be material when it is not), then wrongly states the proper accounting treatment, and then based on those conclusions, RIGHTLY concludes that because this particular matter is material to the FS, the auditor should modify his opinion by…with an ‘except for’ opinion and mention this in the Basis of opinion para…
Will i still be awarded the marks for the conclusion on the opinion?If an “auditor’s report” question calls for discussion there may be scope for the marker to give credit (1 mark) for a conclusion which is consistent with the preceding discussion. However, I don’t think the scenario you suggest is likely – for something to merit discussion of implications for the auditor’s report it will most likely be material. A candidate should always “sanity check” a determination that something is immaterial if that leaves no more to said for the marks available.
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