THE PRELIMINARY ENGAGEMENT ACTIVITIES

The auditor should perform the following activities at the beginning of the audit Perform procedures regarding the continuance of the client relationship and the specific audit engagement Determine compliance with independence and ethics reruirements, and NOTES : The determination of compliance with independence and ethics requirements is not limited to preliminary engagement activities and should be reevaluated with changes circumtances. Establish an understanding with the client regarding the services to be performed on the engagement.

STATUTORY AUDIT ENGAGEMENT

The statutory audit engagement is an agreement made between the scretary department and auditors This agreement is made before the statuory audit is made

The statutory audit engagement is sent to the secretary by the auditors

THE PURPOSE OF STATUTORY

The main purpose of statutory audit engagement is according to the company act 1965.

The statutory audit engagement is made in order to prepare the statutory audit.

ACCEPTANCE OF A CHANGE IN ENGAGEMENT

An auditors who, before the completion of the engagement, is requested to changes the engagement to one which provides a lower level of assurances, should consider the approprianteness of doing so. When the terms of the engagement are changed, the auditor and the client should agree on the new terms.

If the auditors is unable to agree to a change of the engagement and is not permitted to continue the original engagement, the auditor should withdraw and consider whether there is any obligation, either contractual or otherwise, to report to other parties, such as the board of directors or shareholders, the circumstances necessitating the withdrawal.

First phase of the audit begins when the auditor receives an invitation to carry out the audit of a companys financial statements. The auditors decision to accept or reject the invitation must follow certain procedures. The acceptance of the audit is made out on a document called an audit engagement letter. This letter is an important document to the auditor and is kept as one of his working papers.

The engagement letter is an agreement between the CA firm and the client for the conduct of the audit and related services. It should specify whether the auditor will perform an audit, a review or a compilation, plus any other services such tax returns or management consulting. It should also state any restriction to be imposed on the auditors work, deadlines for completing the audit, assistance to be provided by the clients personal in obtaining records and documents and schedules to be prepared fot the auditor. If often includes an agreement on fees, the engagement letter as also a means of informing the client that auditor cannot guarantee that all acts of froud will be discovered.

The audit engagement letter serves as a contract between the auditor or the audit firm and the client company to be audited spelling out the type of audit required.

The audit engagement letter contains all agreements that are understood between the two parties which should help avoid any future misunderstanding.
The audit engagement letter can be used by the auditors as evidence in any legal action taken against him in the future. The audit engagement letter serves as basis for audit planning. The letter spells out the type of audit to be carried out.

The auditor would have had a formal discussion with the prospective clients. The discussion forms the basis for the preparation of this letter. It should contain all the terms as have been agreed upon in the discussion. The audit engagement letter is prepared by the auditors.

Among the factors that must be included in the audit engagement letter, are as follows : (i) Address (ii) The objectives of the audit . (iii) The statement of the basis to be used in the audit (iv) The statement that responsibility in the preparation of the financial statement is the responsibility of the management. The management is also responsible for the internal control and for adopting appropriate accounting policies. The audit engagement letter must be signed by the client as an evidence of agreements with all the terms contained therein.

A copy of letter is kept by the auditors in the permanent file.

Planning is defined as developing on overall audit strategy and an audit plan for the expected nature,timing and extent of planned risk assessment procedures as determine under ISA 315,identifying and Asessing the Risk of Material Misstatement through understanding the entity and its environment, and planned further audit procedures at the assertion level as determined under ISA 330

Ensure that all transactions are executed in accordance with the procedures and approval of specific or general approval of a decision by the management.

Ensure that all transactions are recorded immediately in the correct amount into the appropriate accounts and within the time frame of the transaction occurred.

Ensure only authorized use of company assets in accordance with the vertification and approval by the management.

Ensure the existence of assets belonging to clients as stated in the records

1.

Knowledge to the business

2. Understanding the accounting and internal control systems :

Auditors

ascertain the accounting policies adopted by the company and any changes in those policies.
Auditors

also familiarize himself with the accounting system and chart of accounts set up for processing of transaction by company.
Internal

conrol systems

Auditors

should ascertain and document the internal control systems in the company for the various financial and operational process.Example purchases,sales and others.

3.Preliminary assessment of the financial performance

should perform a preliminary analytical review of the draft financial statement at planning stage. 4. Assessing risks and identify problem
Auditors

conduct an assessment of inherent and control risks and identify the significant audit areas

5.Determining appropriate materiality levels for the audit

should set the materiality levels for audit purposes during the planning stage
Auditors

also should consider the possibility of material misstatement , including the experience of past periods ,or fraud or major errors.

6.Nature,timing and extent of audit procedures

should plan to conduct the audit at an appropriate time such that certain procedures could be carried out effectively.
Auditors

also should consider the effect of information technology on the business and the audit.

7.Co-ordination,direction,supervision,and review.
Auditors

should ascertain the complexity of audit and consider whether other experts or other auditors are involved.
Auditors

also should ensure that the staff assigned for the audit is adequate in terms of number and in terms of seniority and expertise.
Auditors

must prepare an audit assignment time table for each of the audit

sections.

8.Providing better service to the client

should be alert or mindful that the client may sometimes required more good service. 9.Other Matters Conditions where special attention may be required.
The

possibility that the going concern assumption may be subject to question.

nature and timing of special reports or other communication with the company that is expected under the angagement.