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 the audit standard that applies to your letter of engagement under the new IAASA ISAs.
Planning an Audit Applying the New IAASA ISAs
If this Query Of The Week was of interest to you, you will also be interested in our Planning an Audit Applying the New IAASA ISAs online CPD course.
Full details for this online CPD course can be found below.
Planning an Audit Applying the New IAASA ISAs Overview
| CPD Allocation | 1 Hour |
| Fee | €25 (or 1 CPD Club point) |
| Presenter | Neil Doran – OmniPro |
| Category | Audit |
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Query Of The Week – Video Transcript
(Please note that this is a direct unedited transcript of the spoken word as recorded on the video)
This week’s query arose when I was reviewing an audit file for charity engagement 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 should I be watching out for as problems in my letter of engagement?
In response to this query: ISA 210 is the audit standard that governs your letter of engagement. It states in paragraph 10 of the standard the agreed terms of the audit 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 incorporated entity or maybe trustees in this scenario of an unincorporated entity.
So 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 FRS102, section 1A of FRS102 or FRS105. Does the letter of engagement reflect the relevant and applicable laws to the entity and engagement?
If it’s an incorporated entity, it’s company law requirements, 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 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 my letter on my file actually signed and dated correctly? That it is signed, prior to 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.
It is important to note that this third party reporting is where the client is doing the submission to the CRA, that this 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 would encourage you to come to our wider planning of an audit engagement webinar that’s coming up. In addition, if you need up-to-date compliant letters of engagement, check out the bank of 39 letters in the accountants’ resource centre, covering the majority of engagement types an accountant in practice might have. In addition, if you have found this helpful, maybe if you have a question in the context of planning an audit of engagement, send us your question to KnowledgeHUB and we will help and assist in trying to answer that as best we can.