Before accepting a new client, a chartered accountant firm in practice shall determine whether the acceptance would create any threats to compliance with the fundamental principles. This means that when accepting to take on a new client, the proper investigation should be donein this regarding also its owners and business activities toensure the integrity of the potential client. These investigative actions are usually performed as ‘know your client’. In detail this activity can be segregated into 4 sections as mentioned below: Show
I. Background Information
II. Eligibility
III. Management assessment
IV. Investigation of Industry background and Risk Factor
Every Audit firms must ensure that all the above procedures have been complied with before accepting the audit engagement to mitigate the audit risk at certain level. This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this. Posted by: CA Aman Aggarwal AKGVG & Associates What factors should you as auditor consider prior to accepting an engagement?Before accepting an engagement to audit a new Service organization, the service auditor must perform their due diligence around the client acceptance process, anticipate acceptance issues, address the client risk, and perform risk acceptance procedures.
Why auditors need an understanding of the client's industry?Auditors need an understanding of the client's business and industry because the nature of the business and industry affect business risk and the risk of material misstatements in the financial statements. Auditors use the knowledge of these risks to determine the appropriate extent of further audit procedures.
What factors should an auditor consider?The auditor considers many factors in determining the nature, timing, and extent of auditing procedures to be performed in an audit of an entity's financial statements. One of the factors is the existence of an internal audit function.
What are three factors that have increased the importance of obtaining an understanding of a client's business and industry?Answer: Factors that have increased the importance of obtaining an understanding of a client's business and industry include: Advances in information technology have increased connectivity among companies, customers, and vendors. Auditors must understand the risks associated with this increased connectivity.
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