a) Explain four steps that a prospective auditor should take before deciding whether or not to accept nomination as an auditor of a limited liability company. b)...

      

a) Explain four steps that a prospective auditor should take before deciding whether or not
to accept nomination as an auditor of a limited liability company.
b) Explain any four purposes of sending a letter of engagement before an audit is accepted.

  

Answers


Kavungya
(a) The steps that a prospective auditor should take before deciding whether or not to
accept nomination as the auditor of a limited liability company include:
• Meet the directors and operational management to know exactly what the assignment
entails/scope.
• Consider whether he is qualified For appointment that is whether he can be validly
appointed as an auditor
• Request the client to give permission to communicate With the retiring auditor to find
out whether there are any reasons, professional or otherwise as to why he should not
accept the appointment.
• If permission is given to communicate with the outgoing auditor, depending on their
reply, decide whether or not to accept the nomination.
• Review of the audit resources e.g staff/timing of the audit.
• The audit fees to be charged.
• Appointment as per the company's Act.

(b) The purpose of sending a letter of engagement.
• The auditor must be certain that, there is no misunderstanding between him and
management as to the exact scope of his responsibilities.
• It is necessary for tile auditor to formally accept the appointment and the letter of
engagement is the best way of acknowledging that appointment.
• Education to the client
• It forms the basis of the contract between the auditor and the client and this minimises
future misunderstandings.
• Certain verbal discussions or arrangements between the auditor and the management
need to be confirmed and the letter of engagement is used for that purpose.
• The letter may cover services that the auditor is going to provide in addition to the audit
service, it can be used to bring to the attention of the client other services that the
accounting firm can provide.
Kavungya answered the question on May 14, 2019 at 12:02


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