Since 1977

AUDITING THEORY L. R. CABARLES

AT.1807-Preliminary Engagement Activities OCTOBER 2013

LECTURE NOTES
Preliminary Engagement Activities The following are the managements responsibilities, which
constitute the premise on which the audit is conducted:
During this phase of audit, the auditor shall undertake the
Preparation and presentation of the financial
following activities:
statements
Performing procedures regarding the acceptance of the
Design, implementation and monitoring of internal
client relationship and the specific audit engagement;
control to financial statements
Establishing preconditions for an audit;
To provide the auditor with:
Agreeing the terms of the engagement; and
o Access to all information relevant to audit
Communicating with the predecessor auditor, if
o Additional information the auditor may request
applicable.
o Unrestricted access to persons within the entity
Client Acceptance and Continuance
Limitation on Scope Prior to Audit Engagement Acceptance
As discussed in Quality Controls, the auditor shall only
The auditor shall not accept an audit engagement, if
undertake or continue audit engagement where the
management or those charged with governance imposes a

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auditor:
limitation on the scope of work that will result to disclaimer

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is competent to perform the engagement and has the
of opinion unless required by law or regulation to do so.
capabilities, time and resources to do so;

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complies with relevant ethical requirements; and
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considers the integrity of the client.
After the auditor has decided to accept or continue an

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Basis of Audit Engagement audit engagement, the auditor and the client should agree
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the terms of the engagement, preferably through the audit
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In addition, the auditor shall accept or continue an audit
engagement only when the basis of audit engagement has
been agreed, through:
Establishing preconditions for an audit; and
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committee, if any. The agreed terms need to be recorded
in an audit engagement letter or other suitable form of
contract. Audit engagement letter is a written terms of an
engagement in the form of a letter by the auditor to the

Confirming common understanding between the client. An engagement letter documents and confirms the
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auditor and management and, where appropriate, auditors acceptance of the appointment.
those charged with governance (TCWG) on the terms
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of the audit engagement. It is in the interest of both the client and the auditor that
the auditor sends the engagement letter, preferably before
Preconditions for an Audit the commencement of the audit to help avoid
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misunderstandings with respect to the engagement.

The auditor shall establish the presence of the
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preconditions for an audit by:

Contents of the Audit Engagement Letter
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determining that the financial reporting framework

(FRF) is acceptable and is available to intended user Primary Content of the Audit Engagement Letter
applied to FSs; and
Engagement letter primarily includes:
obtaining the agreement of management regarding its
The objective and scope of the audit;
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responsibility and, where appropriate, TCWG to the

The responsibilities of the auditor;
premise on which an audit is conducted.
The responsibilities of management;
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If the preconditions are not present, the auditor shall
discuss the matter with management, if not resolved, the
auditor should not accept the engagement unless required
by law or regulation.
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Identification of the applicable FRF; and
Reference to form and content of audit reports and
statement regarding deviation from form and content,
in certain circumstances.

Acceptable Financial Reporting Framework
A financial reporting framework is the benchmark or
criteria in an audit. As discussed under the framework of
assurance engagements, criteria must be suitable to be
considered acceptable.
In an audit of historical financial statements, the FRF used
is generally the GAAP. In the Philippines, the following are
the acceptable FRF depending on the type of client:
a. The Full Philippine Financial Reporting Standards
(PFRSs)
b. The PFRS for Small and Medium-sized entities (SMEs)
c. Other acceptable basis of reporting
Managements Responsibilities
Additional Contents of the Audit Engagement Letter
Engagement letter may additionally include:
Elaboration of the scope of the audit
The form of any other communication of results of the
audit
Audit and internal control inherent limitations
Planning and performance of the audit, including the
composition of the audit team
Written representations from management
Draft financial statements from management
Audit fees, including computation and billing
Acknowledgement from management
Involvement of other auditors and experts
Involvement of internal auditors and other staff
Arrangements with the predecessor auditor
Any restriction of the auditors liability
Further agreements between the auditor and the entity

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Any obligations to provide audit working papers to
other parties
Audit Fees, Computation and Billing
The requirement for fees charged should be reflective of
the fair value of the work performed and to be performed,
and should take into account the following, among others:
a. The skill and knowledge required for the type of work
involved;
b. The level of training and experience of the persons
engaged on the work;
c. The time necessarily consumed by personnel engaged
on the work; and
d. The degree of responsibility assumed and urgency that
the work entails.
The mere fact that the fees charged to the client is lower
than that of normally quoted by another auditor is not in
itself unethical.
The typical billing methods used by the auditor are:
Fixed or flat The client is billed a lump sum and all-
fee basis inclusive amount for the engagement.
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Actual time Billing is done on the basis of actual time
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charges (Per spent by the staff multiplied by the
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Diem) basis rates/hour agreed upon.
Maximum
fee basis
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The client is charged on a per diem basis,
but will not exceed up to a certain
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maximum amount.
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Retainers The client is billed a fixed fee periodically
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fee basis for the services rendered during a
designated period of time, either on a
monthly, semi-annually or annual basis.
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Audits of Components
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When the auditor of a parent entity is also the auditor of a
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component, the following factors are considered whether
to send a separate engagement letter to the component:
Who appoints the component auditor;
Whether a separate auditors report is to be issued on
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the component;
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Legal requirements in relation to audit appointments;
Degree of ownership by parent; and
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Degree of independence of the component
management from the parent entity.
Recurring Audits
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New engagement letter may not be sent annually to the
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same client. However, the auditor should consider the
following factors when sending new engagement letter:
Misunderstanding of the objective and scope
Any revised or special terms
A recent change of senior management
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A significant change in ownership
A significant change in entitys nature or size
A change in legal or regulatory requirements
A change in the financial reporting framework
A change in other reporting requirements
Acceptance of a Change in the Terms of the Audit
Engagement
Request to Change the Terms of the Audit Engagement
The auditor shall not agree to a change in the terms of the
audit engagement where there is no reasonable
justification for doing so.
A request from the entity for the auditor to change the
terms of the audit engagement may result from:
a change in circumstances affecting the need for the
service;
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a misunderstanding as to the nature of an audit as
originally requested; or
a restriction on the scope of the audit engagement,
whether imposed by management or caused by other
circumstances.
The auditor considers the justification given for the
request, particularly the implications of a restriction on the
scope of the audit engagement.
Request to Change to a Review or a Related Service
If, prior to completing the audit engagement, the auditor is
requested to change the audit engagement to an
engagement that conveys a lower level of assurance, the
auditor shall determine whether there is reasonable
justification for doing so considering any legal or
contractual implications of the change.
If the change is justifiable, record the new terms in a new
engagement letter. The new report should not include
reference to:
the original audit engagement; and
any procedures performed in the audit engagement,
except if changed to an agreed-upon procedures
Declining a Change in Engagement
The auditor shall not agree to a change of engagement
where there is no reasonable justification for doing so. An
example might be a restriction on the scope of the audit
engagement where the auditor is unable to obtain
sufficient appropriate audit evidence regarding receivables
and the entity asks for the audit engagement to be
changed to a review engagement to avoid a qualified
opinion or a disclaimer of opinion.
If the auditor is unable to agree to a change of the terms
of the audit engagement and is not permitted by
management to continue the original audit engagement,
the auditor shall:
withdraw from the audit engagement (unless required
by law or regulation); and
determine whether there is any obligation to report to
other parties, such as those charged with governance,
owners or regulators.
Communication with Predecessor Auditor
For prospective clients that have previously been audited
by another CPA firm, the new (successor) auditor is
required, under the code of ethics, to communicate with
the predecessor auditor is to help the successor auditor
evaluate whether to accept the engagement.
The burden of initiating the communication rests with the
successor auditor. However, confidentiality requires that
the predecessor auditor obtain permission from the client
before the communication can be made.
The successor auditor normally inquires the following from
the predecessor auditor about the prospective client:
Integrity of management
Disagreements with management about audit
procedures or accounting principles
Communication with Audit Committee about fraud,
illegal acts, or internal control
Reason for change in auditor
If a client will not permit the communication or the
predecessor will not provide a comprehensive response,
the successor should seriously consider the acceptability of
a prospective engagement, without considerable other
investigation.
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Our audit will be conducted on the basis that

Example of an Audit Engagement Letter
To the appropriate representative of management or those
charged with governance of ABC Company
[The objective and scope of the audit]
You have requested that we audit the financial statements
of ABC Company, which comprise the balance sheet as at
December 31, 2013, and the income statement, statement
of changes in equity and cash flow statement for the year
then ended, and a summary of significant accounting
policies and other explanatory information. We are pleased
to confirm our acceptance and our understanding of this
audit engagement by means of this letter. Our audit will be
conducted with the objective of our expressing an opinion
on the financial statements.
[The responsibilities of the auditor]
We will conduct our audit in accordance with Philippine
Standards on Auditing (PSAs). Those standards require
that we comply with ethical requirements and plan and
[management and, where appropriate, those charged with
governance] acknowledge and understand that they have
responsibility:
(a) For the preparation and fair presentation of the
financial statements in accordance with Philippine
Financial Reporting Standards;
(b) For such internal control as [management] determines
is necessary to enable the preparation of financial
statements that are free from material misstatement,
whether due to fraud or error; and
(c) To provide us with:
(i) Access to all information of which [management] is
aware that is relevant to the preparation of the
financial statements such as records,
documentation and other matters;
(ii) Additional information that we may request from
[management] for the purpose of the audit; and
(iii) Unrestricted access to persons within the entity
from whom we determine it necessary to obtain
audit evidence.
As part of our audit process, we will request from
[management and, where appropriate, those charged with

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perform the audit to obtain reasonable assurance about governance], written confirmation concerning
whether the financial statements are free from material representations made to us in connection with the audit.

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misstatement. An audit involves performing procedures to
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obtain audit evidence about the amounts and disclosures We look forward to full cooperation from your staff during
in the financial statements. The procedures selected our audit.

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depend on the auditors judgment, including the
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assessment of the risks of material misstatement of the [Other relevant information]
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financial statements, whether due to fraud or error. An
audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of
accounting estimates made by management, as well as
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[Insert other information, such as fee arrangements,
billings and other specific terms, as appropriate.]
[Reporting]

evaluating the overall presentation of the financial [Insert appropriate reference to the expected form and
statements. content of the auditors report.]
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Because of the inherent limitations of an audit, together The form and content of our report may need to be
with the inherent limitations of internal control, there is an amended in the light of our audit findings.
unavoidable risk that some material misstatements may
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not be detected, even though the audit is properly planned Please sign and return the attached copy of this letter to
and performed in accordance with PSAs.
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indicate your acknowledgement of, and agreement with,

In making our risk assessments, we consider internal the arrangements for our audit of the financial statements
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control relevant to the entitys preparation of the financial including our respective responsibilities.
statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose XYZ & Co.
of expressing an opinion on the effectiveness of the
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entitys internal control. However, we will communicate to Acknowledged and agreed on behalf of ABC Company by
you in writing concerning any significant deficiencies in (signed)
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internal control relevant to the audit of the financial ......................

statements that we have identified during the audit. Name and Title
Date
- done -
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MULTIPLE CHOICE
1. Which of the following would an auditor least likely 2. In making a decision to accept or continue with a
perform as part of the auditors preliminary client, the auditor should consider:
engagement activities or pre-planning or pre- a. b. c. d.
engagement phase? Its competence Yes Yes Yes Yes
a. Perform procedures regarding the continuance of Its independence Yes No Yes No
the client relationship and specific engagement. Its ability to serve the client Yes Yes Yes No
b. Evaluate compliance with ethical requirements, properly
including independence. The integrity of clients Yes Yes No Yes
c. Establish an understanding of the terms of the management
engagement. That understanding of the Yes No Yes No
d. Obtain understanding of the legal and regulatory terms of engagement has
framework applicable to the entity. been obtained with the
management

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3. The use by management of an acceptable financial b. Chief financial officer.

reporting framework in the preparation of the financial c. Chairman of the board of directors.
statements and the agreement of management and, d. Audit committee.
where appropriate, those charged with governance to
the premise on which an audit is conducted. 10. The form and content of audit engagement letters may
a. Terms of audit engagement vary for each client, but they would generally include
b. Preconditions for the audit reference to the following, except
c. Scope of the audit a. The objective of the audit of financial statements.
d. FS Audit b. Auditors responsibility for the financial statements.
c. The form of any reports or other communication of
4. If management or those charged with governance results of the engagement.
impose a limitation on the scope of the auditors work d. Unrestricted access to whatever records,
in the terms of a proposed audit engagement such that documentation and other information requested in
the auditor believes the limitation will result in the connection with the audit.
auditor disclaiming an opinion on the financial
statements, the auditor shall not accept such a limited 11. Which of the following is not included in an
engagement as an audit engagement, unless required engagement letter?
by law or regulation to do so. a. Restriction on cash balances, lines of credit by
similar arrangements
The auditor shall agree the terms of the audit b. Accessibility to all financial records
engagement with management or those charged with c. Client imposed limitation in the scope
governance, as appropriate. d. Limitation in the scope of examination as imposed
a. True, True by circumstances
b. True, False

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c. False, False 12. Before performing any audit procedures. The auditor
d. False, True and the client should agree on the

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5. Preliminary arrangements agreed to by the auditor and expressed engagement
the audit client should be reduced to writing by the a. Yes Yes

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auditor. The best place to set forth these arrangements b. No Yes
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is in c. No Yes
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a. A memorandum to be placed in the permanent d. Yes Yes

section of the auditing working papers.
b. An audit engagement letter. 13. In determining audit fees, an auditor may take into
c. A client representation letter. account each of the following except
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d. A confirmation letter attached to the constructive a. Volume and intricacy of work involved.
services letter.
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b. Degree of responsibility assumed.

c. Number and cost of manhours needed.
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6. Engagement letters are widely used in practice for d. Size and amount of capital of client.
professional engagements for all types. The primary
purpose of the engagement letters is to 14. Retainers fee basis is when
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a. Remind management that the primary a. Billing is done on the basis of actual time spent at
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responsibility for the financial statements rests the agreed rates/hour.

with management b. The client is charged on a per diem basis with a
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b. Provide a written record of the agreement with the cap or ceiling amount.
client as to the services to be provided c. The client is billed a fixed fee periodically for the
c. Satisfy the requirements of the CPAs liability for services rendered during a designated period of
insurance policy time.
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d. Provide a starting point for the auditors d. The client is billed at a single amount for the entire
preparation of the preliminary audit program engagement.
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7. When should an auditor obtain an engagement letter? 15. A type of billing audit client which combines lump sum
a. Whenever a prospective client offers to hire the and per diem methods is known as
audit firm a. Retainers fee basis
b. During the interim audit period, after the auditor
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b. Maximum fee basis

has evaluated the clients internal control and c. Either (a) and (b) above
estimated the amount of time required for the d. None of the above
audit
c. When a new client is accepted by the auditor 16. Which of the following factors do not influence the
d. At the conclusion of the field work, just prior to decision of the auditor to send a separate engagement
signing the audit report letter to the parent entity and its component
(subsidiary, branch or division) assuming the same
8. It is in the interest of both client and auditor that the auditor handles both entities?
auditor sends an audit engagement letter, preferably a. legal requirements
before b. degree of ownership by parent
a. The performance of substantive testing. c. ethical requirements
b. The commencement of the engagement. d. whether a separate audit report is to be issued on
c. The completion of audit. the component
d. Before the issuance of audit report.
17. Assuming a recurring audit, in which of the following
9. Which of the following normally signs the engagement situations would the auditor be unlikely to send a new
letter for an audit of a public company? engagement letter to the client?
a. Corporate treasurer.

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a. A recent change in partner and/or staff involved in
the audit engagement.
b. A change in the terms of engagement.
c. A recent change of client management.
d. A significant change in the nature or size of the
client's business.
18. On recurring audits, the auditor may decide not to
send a new engagement letter each year. However,
he might decide to send a new letter when:
a. Any indication that the entity misunderstands the
objective and scope of the audit.
B A change in the financial reporting framework
adopted in the preparation of the financial
statements or other reporting requirements
c. A significant change in ownership
d. All of the above
19. When a change in the type of engagement from higher
to lower level of assurance is reasonably justified, the
report based on the revised engagement
a. Should not contain a separate paragraph that
refers to the original engagement.
b. Should not refer to any procedures that may have
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been performed in the original engagement.
c. Omits reference to the original engagement.
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d. All of the above eH w
20. Which of the following would ordinarily be considered a
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reasonable basis for requesting a change in the
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engagement
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a. a change in circumstances.
b. a misunderstanding as to the nature of the audit.
c. a restriction on the scope of the engagement,
whether imposed by management or caused by
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circumstances.
d. Both a and b
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21. The auditor should not agree for a change of
engagement when there is no reasonable justification
for doing so.
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If the auditor is unable to agree to a change of the
engagement and is not permitted to continue the
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original engagement, this will have an effect on the
auditors report.
a. True, False c. True, True
b. False, False d. False, True
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22. Which of the following actions may be appropriate if
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the auditor is unable to agree to a change of the
engagement and is not permitted to continue the
original engagement?
I. Auditor should withdraw from the engagement
II. Consider whether there is any obligation to report
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to the board of directors or shareholders the
circumstances necessitating withdrawal
a. I c. II
b. I, II d. Neither I nor II
23. In audit situation, communication between successor
and predecessor auditors should be
a. authorized in an engagement letter
b. acknowledged in a representation letter
c. either written or oral
d. written and included in the working papers
24. Pedro, CPA, is succeeding Maria, CPA, on the audit of
Peta Manufacturing, Inc. Pedro plans to consult Maria
and to review Marias prior year working papers. Pedro
may do so if
a. Maria consents
b. Peta Manufacturing, Inc. consents
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c. Maria and Peta Manufacturing, Inc. consent
d. Maria and Pedro consent
25. Prior to the acceptance of an audit engagement with a
client who has terminated the services of the
predecessor auditor, the CPA should
a. Contact the predecessor auditor without advising
the prospective client and request a complete
report of the circumstances leading to the
termination with the understanding that all
information disclosed will be kept confidential.
b. Accept the engagement without contacting the
predecessor auditor since the CPA will include
procedures to verify the reason given by the client
for termination.
c. Not communicate with the predecessor auditor
because this would in effect be asking the auditor
to provide the confidential relationship between the
auditor and client.
d. Advise the client of the intention to contact the
predecessor auditor and request permission for the
contact.
26. Which of the following will an auditor most likely
discuss with the former auditors of a potential client
prior to acceptance?
a. Integrity of management.
b. Reasons for changing audit firms.
c. Disagreements with management regarding
accounting principles.
d. All of the above must be discussed.
27. Janie Jones, CPA is proposing on a prospective audit
engagement for White Mountain Enterprises. After
obtaining written permission of White Mountain, Janie
is required to perform what procedure prior to
accepting it as a new client?
a. Provide full disclosure of fees that will be billed to
White Mountain.
b. Contact the former auditor to ensure all
disagreements have been resolved.
c. Contact the former auditor about certain matters
of interest in Janies decision to accept White
Mountain as a client.
d. Contact the former auditor to determine if all fees
have been paid, the change in auditors have been
approved and integrity issues have been
overcome.
28. An incoming auditor should request the new client to
authorize the predecessor auditor to allow a review of
the predecessor s
Engagement letter Working paper
a. Yes Yes
b. Yes No
c. No Yes
d. No No
29. Which of the following factors most likely would cause
an auditor not to accept a new audit engagement?
a. An inadequate understanding of the entitys
internal control structure.
b. The close proximity to the end of the entitys fiscal
year.
c. Concluding that the entitys management probably
lacks integrity.
d. An inability to perform preliminary analytical
procedures before assessing control risk.
30. The auditor will utilize many resources to assess
management integrity in the client acceptance process.
Which of the following will an auditor most likely
refrain from using in this search?
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a. Predecessor auditor.
b. Other professionals in the business community.
c. Public databases.
DO-IT-YOURSELF (DIY) DRILL
1. Before accepting an engagement to audit a new client,
a CPA is required to obtain
a. A preliminary understanding of the prospective
clients industry and business.
b. The prospective clients signature to the
engagement letter.
c. An understanding of the prospective clients control
environment.
d. A representation letter from the prospective client.
2. On recurring audits, the auditor may decide not to
send a new engagement letter each year. However,
he might decide to send a new letter when:
a. There is a change in the auditors who will assist
in the conduct of the audit.
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b. There is a legal requirement
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c. There is a change in the client's accounting policy
for inventories.
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d. There is a change in the estimated life of the
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client's property and equipment.
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3. Which of the following is not included in an
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engagement letter?
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a. Limitation in the scope of examination as imposed
by client
b. Limitation in the scope of examination as imposed
by circumstances
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c. Restrictions on auditors liability, when such
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possibility exists
d. Satisfactory title to assets, liens on assets and
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assets pledged
4. The following matters are generally included in an
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auditors engagement letter, except
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a. Managements responsibility for the financial
statements
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b. The scope of the audit
c. The fact that because of the test nature and other
inherent limitations of the audit, together with the
inherent limitations of internal control, there is an
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unavoidable risk that even some material
misstatements may remain undiscovered.
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d. The factors to be considered in setting preliminary
judgments about materiality
5. Which of the following matters is generally included in
auditor's engagement letter?
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a. Management's responsibility for the entity's com-
pliance with laws and regulations.
b. The factors to be considered in setting preliminary
judgments about materiality.
c. Management's liability for illegal acts committed by
its employees.
d. The auditor's responsibility to search for significant
internal control deficiencies.
6. An audit engagement letter least likely includes
a. A reference to the inherent limitation of an audit
that some material misstatements may remain
undiscovered.
b. Identification of specific audit procedures that the
auditor needs to undertake.
c. Description of any letters or reports that the
auditor expects to submit to the client.
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d. All of the above will typically be used by an auditor
in the search.
- now do the DIY drill -
d. d. Arrangements concerning the involvement of
internal auditors and other clients staff.
7. The following are the reasons why the auditor will send
a new engagement letter each period, except
a. Any revised or special terms of the engagement
b. A recent change in the audit team
c. A significant change in nature or size of the clients
business
d. Legal requirements
8. 1st statement Where the terms of the engagement
are changed, the auditor and the client should agree
on the new terms.
2nd statement The auditor should not agree to a
change of engagement when there is no reasonable
justification for doing so.
3rd statement If management or those charged with
governance impose a limitation on the scope of the
auditors work in the terms of a proposed audit
engagement such that the auditor believes the
limitation will result in the auditor disclaiming an
opinion on the financial statements, the auditor shall
not accept such a limited engagement as an audit
engagement, unless required by law or regulation to
do so.
a. 1st and 2nd statements are correct; 3rd statement
is incorrect.
b. 1st and 3rd statements are correct; 2nd statement
is incorrect.
c. 2nd and 3rd statements are correct; 1st statement
is incorrect.
d. All statements are correct.
9. Which of the following is(are) proper when a change of
auditors has taken place or is in process?
a. The successor auditor should advise the client of
his intention to contact the predecessor auditor
and request permission for the contact
b. The integrity of management should not be subject
of communication between the predecessor and
successor auditors
c. Communication between the predecessor and
successor auditors should take place only after the
successor auditor has accepted the engagement
d. All of the above
10. Before accepting an audit engagement, a successor
auditor should make specific inquiries of the
predecessor auditor regarding the predecessors
a. opinion of any subsequent events occurring since
the predecessors audit report was issued
b. understanding as to the reasons for the change of
auditors
c. awareness of the consistency in the application of
GAAP between periods
d. evaluation of all matters of continuing accounting
significance
11. Before accepting an audit engagement, a successor
auditor should make specific inquiries of the
predecessor auditor regarding
a. disagreements the predecessor had with the client
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concerning auditing procedures and accounting
principles
b. the predecessors evaluation of matters of
continuing accounting significance
c. the degree of cooperation the predecessor received
concerning the inquiry of clients lawyer
d. the predecessor auditors assessment of inherent
risk and judgments about materiality
12. The successor auditor requested permission to
communicate with the predecessor auditor and review
certain portions of the predecessor auditors working
papers. The prospective clients refusal to permit this
will bear directly on the successor auditors decision
concerning the
a. adequacy of the preplanned audit program
b. ability to establish consistency in application of
accounting principles between years
c. apparent scope limitation
d. integrity of management
13. Kool Connections, Inc. requests that Wreath and
Greenworth Auditors make a proposal to provide audit
services for the company. Which of the following is a
c. Greenworth may decide not to accept Kool
Connections based upon the perceived risk of
being associated with Kool.
d. Greenworth will contact the BOA or the PICPA and
ask for a review of the proposal prior to
acceptance.
14. Which of the following factors most likely would
influence an auditors determination of the auditability
of the entitys financial statements
a. The complexity of the accounting system.
b. The existence of related party transactions.
c. The adequacy of the accounting records
d. The operating effectiveness of control procedures.
15. If the auditor believes that an understanding with the
client has not been established, he or she should
ordinarily
a. Perform the audit with increased professional
skepticism
b. Assess the control risk at the maximum level and
perform a primarily substantive audit
c. Decline to accept or perform the audit
d. Modify the scope of the audit to reflect an

m
er as
correct assumption surrounding the result of the increased risk of material misstatement due to
proposal? fraud

co
a. Greenworth is required to accept Kool Connections
eH w
if selected as its auditors. - end of AT.1507 -
b. Greenworth should interview the prior audit firm

o.
prior to releasing the proposal to Kool Connections.
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https://www.coursehero.com/file/14402585/AT1807-Preliminary-Engagement-Activitiespdf/
Page 7 of 7 www.prtc.com.ph AT.1507

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