Welcome to Query Of The Week
Welcome to this week’s Query Of The Week. Each week our technical team respond to a huge number of client queries and in this segment, we share with you the most common questions that keep coming up time and time again.
In this week’s Query Of The Week, Neill Doran discusses what problems to look out for in Letters of Engagement
Audit Exempt Considerations
If this Query Of The Week was of interest to you, you will also be interested in our Audit Exempt Considerations which is scheduled for Wednesday, 1 May 2019.
|Date||Wednesday, 1 May|
|CPD Allocation||1 Hour|
|Fee||€38 (or 1 CPD Club point)|
|Presenter||Des O’Neill – OmniPro|
Query Of The Week – Video Transcript
(Please note that this is a direct unedited transcript of the spoken word as recorded on the video)
Each week our technical team respond to a massive number of client queries, and in this segment, we share with you the most common questions that keep coming up time and time again.
In this week’s Query Of The Week, Neill Doran discusses five significant pitfalls of Audit files
On a day-to-day basis, I provide cold file reviews and hot file review services. This week’s query arose when an old file for charity engagement was being reviewed where the auditor was performing submissions to the charity’s regulatory authority on behalf of the client charity. The Letter of Engagement on the file had several issues in it which meant the Letter of Engagement was not appropriate to the audit engagement, and as a result, the client effectively asked me what problems they should watch out for in their Letter of Engagement?
Problems to watch out for in Letter of Engagement
ISA 210 is the oldest Standard that governs your Letter of Engagement. It states in paragraph 10 of the Standard the agreed terms of the old engagement shall be recorded in an audit engagement letter or another suitable form of written agreement and shall include:
- The objective and scope of the audit of the financial statements,
- The responsibilities of the auditor, and
- The responsibilities of those charged with governance, i.e., the directors for an incorporated entity or maybe trustees in this scenario of an unincorporated entity.
In responding to the question asked with ISA 210 in mind, “Does my letter set out the scope of the audit work, the financial reporting framework that I’m going to be preparing my accounts under, being at first one or two, section 1A of FRS one of two or FRS one of five?”
Does the Letter of Engagement reflect the relevant and applicable laws to the entity and engagement? If it’s an incorporated entity, it’s my company law, and accordingly, I also have the Charities Act to consider in the context of the work I’m going to be doing. As the auditor is performing third party reporting in this situation, to the CRA, the Charities Reporting Authority or Regulatory Authority. Does the Letter of Engagement reflect this third-party reporting obligation? And the non-audit services that the client is going to be performing and doing?
Finally, is the letter on file actually signed and dated correctly? Was it signed, before the commencement of the audit work at the outset of the engagement? That is the key question. And I would encourage you to ensure that it’s done at the start of every engagement. Before you even commence any audit work. So, it’s important to note, client submissions to the CRA is not solely linked to charities reporting obligations but is also applicable to an investment or insurance broker situation that is a central bank regulated entity. This is more about what’s included in the context of a third-party reporting engagement and what’s included in a Letter of Engagement.
If you’ve found this helpful, I encourage you to come to our wider planning of an audit engagement webinar that’s coming up soon. Also, if you need up-to-date compliant letters of engagement, check out the bank of 39 letters in the Accountant’s Resource Centre, covering the majority of engagement types an accountant in practice might have.
Also, if this information has been useful to you, and you have a question in the context of planning an audit of engagement, send us your question to knowledge help, and we will help and assist in trying to answer that as best we can. I’m Neill Doran of OmniPro Practice Support and thank you.