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Dear Mr Mike,
I would like to know the relationship between Tendering and Acceptance. As my current understanding, acceptance means:
(1) audit firm accepts that they will conduct the audit for the client they have won the tender (so: acceptance is the next phase of tendering)
OR
(2) continue auditing for existed client (no tender here as the audit committee nominated current audit firm and shareholders authorized the nomination in AGM)Is there any case that the audit firm wins the tender but for some reasons not accepting the engagement? It looks not so good for firm reputation, like: I love you but I will not marry you!
By the way, can a new client nominates the firm without tendering (so: acceptance here is similar to continuing an existed engagement)?
Thank you in advance!
Oh dear, you’re back to front here (And what do you mean, you love me but you won’t marry me? We’ve not even been introduced!)
An entity will look for an auditor – maybe it’s time for a change of auditors
The entity will write to, say, 5 or 6 firms of auditors and invite them to submit tenders for carrying out the audit assignment
An invitation is not an offer, nor is it an acceptance. It’s inviting these firms to tender for the assignment and, in this context, we can paraphrase that and say that the audit firms are making an offer to the entity
The entity will consider these 5 or 6 responses and notify the lucky winner. That notification is the acceptance by the client of the offer made by the successful prospective new auditors
So, in summary
1 – invitation by entity to 5 or 6 firms
2 – those firms submit their tenders and we can take that as a number of offers being received by the entity
3 – entity reviews these offers, selects the one that they wish to accept and notifies the “winner” and that’s acceptance of the winner’s offer
‘Is there any case that the audit firm wins the tender but for some reasons not accepting the engagement?’
The act of ‘winning’ a tender competition is concluded by being notified by the prospective client that you have ‘won’. The audit firm COULD back away and say that they’ve changed their minds but that has to be seen as a most unusual and unlikely event
‘By the way, can a new client nominates the firm without tendering’
I believe that that is possible but, again, unlikely
Thank you for your reply!
As your question, I just feel that if a firm joins a tender, it is similar to flirting a girl and saying that “I love you”. But, at the end, after wining the tender (“the heart of this girl”), the firm (“boy”) now says that I could not accept the engagement (“we will not marry each other”). So, it is somehow….ridiculous for the firm image. The client now must contact next candidate, and it takes time!
To sum up, after wining the tender, the audit firm still must do some procedures relating to acceptance the engagement (procedures which are pointed out in ISQC1). After this, the firm may accept or not. Is it correct, Mr Mike?
Extensive research will have been undertaken by the firm before (or in the process of) submitting their tender. Yes, further preparatory work will be involved but the firm must have a good idea of what’s involved already
This is a first time for me – I have never considered the submission of a tender as being remotely like the tactics used by a boy when trying to … win the heart of a girl
I’ll need to think about this!
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