You are a partner in Nii and Nana Associates, a firm of Chartered Accountants. You have just been nominated for the audit of Wine and Dine Ltd. a catering company in the twin-city. The company and its officers are not known to the firm. The company has just been incorporated and has not previously had an audit. You are about ready to accept the nomination.
Required:
Discuss why it is important for auditors to carry out procedures before accepting nomination for appointments. (5 marks)
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The code of ethics for professional accountants require that professional accountants or auditors accept only engagement which they are competent and capable of performing in addition they must ensure that they comply with the relevant statutory and legal requirements. It is therefore necessary for them to carry out procedures and consider the following factors:
- They must consider whether they are professionally and legally qualified to accept the engagement
- They must consider whether there are any ethical issues that may confront them if they accept the nomination. Example threats to the objectivity and independence
- They must consider whether they have the time and resources including expert knowledge and skills to serve the client
- They must consider whether they have been properly nominated and any outgoing auditor has properly parted with his client.
- They must also fulfil the professional etiquette requirement of communication with the outgoing Auditor if any as a sign of courtesy and to require information as to whether there are professional reasons for not accepting the nomination.
- The procedures should also enable the auditors to determine whether the prospective client has integrity and falls within the risk appetite of the firm.
- Therefore on the whole the procedures are carried out to enable the auditor make an informed decision whether to accept or reject the nomination.