Annual Audit Manual

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3001 Introduction
Oct-2012

In This Section

Initial engagement activities—matters covered in this section

Overview

This section explains the subsections to be covered in section 3000 on initial engagement activities.

Initial engagement activities—matters covered in this section

CAS Requirement

The auditor shall undertake the following activities at the beginning of the current audit engagement:

(a) Performing procedures required by CAS 220 regarding the acceptance and continuance of the client relationship and audit engagement;

(b) Evaluating compliance with relevant ethical requirements, including those related to independence, in accordance with CAS 220; and

(c) Establishing an understanding of the terms of the engagement, as required by CAS 210. (CAS 300.6)

CAS Guidance

Performing the preliminary engagement activities specified in paragraph 6 at the beginning of the current audit engagement assists the auditor in identifying and evaluating events or circumstances that may adversely affect the auditor's ability to manage and achieve quality at the engagement level in accordance with CAS 220. (CAS 300.A6)

Performing these preliminary engagement activities enables the auditor to plan an audit engagement in order to, for example:

  • Maintain the necessary independence and ability to perform the engagement.

  • Determine that there are no issues with management integrity that may affect the auditor's willingness to continue the engagement.

  • Determine that there is no misunderstanding with the client as to the terms of the engagement. (CAS 300.A7)

Performing initial procedures on both client continuance and evaluation of relevant ethical requirements (including independence) at the beginning of the current audit engagement means that they are completed prior to the performance of other significant activities for the current audit engagement. For continuing audit engagements, such initial procedures often occur shortly after (or in connection with) the completion of the previous audit. (CAS 300.A8)

OAG Guidance

Before establishing the overall audit strategy and developing the detailed audit plan, the engagement team carries out initial key tasks in relation to the engagement.

This section on initial engagement activities sets out CAS requirements, OAG policy, and related guidance on the following activities, and considerations:

  • assessing acceptance and continuance of client relationships and audit engagements OAG Audit 3010;

  • considering independence requirements OAG Audit 3030;

  • understanding the terms of the engagement and preparing an engagement letter OAG Audit 3040;

  • considerations applicable to initial audit engagements where we are appointed as auditors for the first time, including considerations on auditing opening balances OAG Audit 3050;

  • building the engagement team; understanding the respective roles of the engagement leader, quality reviewer, team manager, team members; and assigning responsibilities OAG Audit 3060;

  • planning for the effective review of audit work and documentation OAG Audit 3070;

  • considering situations where consultation is required or may be needed, and procedures relating to performing and documenting consultations, including where differences of opinion arise during the engagement OAG Audit 3080;

  • using an auditor’s expert on the audit engagement OAG Audit 3090;

  • assigning specialists in accounting or auditing to the engagement team OAG Audit 3100;

  • considerations where the entity uses the work of a management’s expert in the preparation of the financial statements OAG Audit 3110.

Related guidance

Guidance on documentation of audit work is given in OAG Audit 1100.