Whether to accept new clients or retain existing clients is a crucial decision for every audit firm to make. Thus, it is important for an audit firm to evaluate whether a client meets standards of integrity before accepting the job. This process should be properly documented.
There are several things to take into consideration in the process of accepting or retaining clients. One of these is the sending of engagement letters. Do you really need to send out a new engagement letter? Anyone who has had a quality review will find that the first things the reviewer looks at is the engagement letter. CA ANZ have stated in their quality review results that Terms of Engagement is one of the top issues for practitioners.
For tax and accounting engagements, APES 305 Terms of Engagement states that members in public practice are required to document and communicate to the client the terms of engagement. It is not a requirement that this is in the form of a letter. However, an engagement letter is best practice.
However, for audit engagements ASA 210 Agreeing the Terms of Audit Engagements requires the terms of the audit engagement to be recorded in an engagement letter unless the regulations or law provide details of the engagement.
Aside from engagement letters, there are other important things to consider in the process of accepting or retaining clients. Get a detailed understanding of this process through Effective PD’s “Client Acceptance and Retention” webinar. The webinar covers subtopics such as knowing when to send trustee representation letters, protecting auditor independence, conflict of interest situations and how to evaluate clients.
To subscribe to Effective PD webinars, visit www.effectivepd.com.au. Effective PD offers an innovative way for busy accountants to be on top of their game with continuing professional development in a brief, flexible and easy way.