Company A is a manufacturer of gaming machines. In a recent investigation by the

Question

Company A is a manufacturer of gaming machines. In a recent investigation by the Corruption Agency that they have been alleged to offer incentives to the members of the parliament to support a proposed bill which would allow increased number of gaming machines in licensed premises. However, there are still no charges to the company. The auditors of Company A were changed during the current year. The executive director of Company A was not happy with the change as the previous auditors had been auditing the company for the past 15 years. The director believes that a lot of time would be wasted in getting the new auditors to understand the systems and processes of the company. Required: Your audit partner has been just approached to accept the audit engagement of Company A. Outline the ethical, legal and other factors to be considered in the decision to accept the audit engagement for the current year and also outline possible steps which are necessary prior to the appointment.

Explanation / Answer

A change in requirements which effects the entity’s financial statements affects the services being provided by the organization and its clients, any unethical or illegal record being recorded in the books of accounts directly holds the accountability of the auditors, while any restrictions or pressure being made on the accountants or auditors of the organization to manipulate any sort of data is illegal and unethical in nature, thus to avoid these circumstances the auditors must have an agreement with the organization or a sort of code of conduct with the firm at the time of engagement of the auditors to the organization. The auditor should also consider contractual implications of the engagement as in the above case the reason for change seems to be lack of availability of audit evidences.

The circumstances in which the auditor should not accept the audit engagement are –

Important points to remember while accepting audit engagement –

Steps which are necessary prior to the appointment of auditor –

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