Question

An audit firm must evaluate the client and the engagement according to professional standards.
Do you feel that the full evaluation must be done on both new and existing clients? Do you think this evaluation is an effective method to assess clients? Explain your answers, using examples.

Answer 1

Answer)

For a new client the full evaluation need to be done to assessing the client.However such full assessment need to be done for the old client if and if there is change in top management or ownership.This because for example ABC LTD have amalgamated with C ltd.Now the existing auditor of ABC LTD. need to do full evaluation to see if there is any new changes made by C LTD in following the financial reporting framework etc. due to change in culture or so.Otherwise the evaluation can be done only in areas in the weak areas if any found in previous audit period or areas where change in accounting policies or laws has happened.

I think such evaluation is an effective method to assess the client because it gives auditor a detailed idea about the client like the financial reporting framework followed by the client, accounting policies used, integrity of the management, weakness in internal controls etc which gives him an idea to choose the procedure to obtain sufficient and appropriate audit evidence.