Question

What is the auditor’s responsibility when getting a new audit client?

Answer 1

Auditor’s responsibility when getting a New Audit Client

       The auditor should undertake the following activities before starting an initial audit:

1. Perform procedures regarding the acceptance of the client relationship and the specific audit engagement; and
2. The auditor should consider whether a relationship with or service provided by an auditor:

• creates a mutual or conflicting interest with their audit client;
• places them in the position of auditing their own work;
• results in their acting as management or an employee of the audit client; or
• places them in a position of being an advocate for the audit client.

3. The topics you discuss at the initial interview vary based on how well you know the potential client. Certainly, you discuss what services the client requires and how or whether your firm can fulfil these goals. You also need to find out whether the potential client has been audited in the past and, if so, who conducted the audit. Ask whether the client is interviewing other CPA firms for the job.
4. Review existing records is a good idea to look at interim financial statements and prior years’ tax returns. Doing so gives you an idea whether the financial records can be audited and whether management is committed to sound accounting principles.
5. The condition of the financial statements offers clues as to their auditability. Sometimes you can just look at the financial statements and realize they’re a mess, which affects their auditability.
6. If the potential client severed relations with its old CPA firm, you must get the client’s permission to talk to the previous auditor to get the scoop on any problems that the auditing firm may have encountered with client integrity, disagreements about how the audit should be conducted, application of generally accepted accounting principles, or lax internal controls.