REGNRSG 105 Lecture Notes - Lecture 15: Audit Trail, Trial Balance, Engagement Letter
Document Summary
Risk management activities: activities before beginning any audit engagement. (1) client acceptance or continuance. Public accounting firms are not obligated to accept undesirable clients, nor are they obligated to continue to serve clients when relationships deteriorate or when the management comes under a cloud of suspicion. The process activities are clearly focused on understanding and managing risk to the audit firm. Stages of an audit: (1) obtain engagement; (2) engagement planning; (3) risk assessment; (4) The audit client must grant its approval before the communication can occur between both auditors (not given red flag). Communication about management"s integrity, disagreements with accounting principles, audit procedures, and the reason for a change in auditors. Management integrity is the primary reason for accepting (or not accepting) an audit engagement. Form 8-k: the special events report filed with the sec whenever certain significant corporate events such as changes in control, legal proceedings, and changes of auditor occur. (2) compliance with independence and ethical requirements.
