Acceptance and Continuance of Clients and Engagements Solutions

Contents:

Introduction
Client Integrity
Engagement Completion
Client Understanding

Peer Review Guide > Sample Recommendations for Strengthening Quality

 

Introduction:

The list shows some of your options for revising policies and procedures to strengthen areas of the firm's quality control related to acceptance and continuance of clients and engagements. Other alternatives may also exist.

A firm's controls in this area of a firm's practice focuses on policies and procedures that a. This element expands the previous "integrity of management" concept, which focused on the client relationship, to include consideration of engagement acceptance. Under the new standard, a firm's quality control system should provide reasonable assurance that the firm:

  1. Only undertakes engagements that the firm can reasonably expect to be completed with professional competence, and
  2. Appropriately considers risks associated with providing service in particular circumstances.
The standard also requires that a firm's policies and procedures provide for obtaining an understanding with the client on the nature, scope and limitations of the services to be performed, but defers to professional standards for guidance in determining whether the understanding should be oral or written.
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Client Integrity:

  1. Obtain and evaluate financial information regarding the client and it operations.
  2. Make inquiries of the client management about the nature of services to be performed.
  3. Make inquiries of those professionals who have business relationships with the client.
  4. Communicate with the predecessor accountant or auditor.
  5. Evaluate known information about the integrity of the client's management.
  6. Develop or adopt questions to ask prospective clients.
  7. Require a second person approval for the acceptance of new clients.

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Engagement Completion

  1. Determine if the firm has or can acquire the necessary skill and training to complete the engagement in conformity with professional standards.
  2. Communicate the conditions under which the firm should not undertake an engagement.

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Client Understanding

  1. Adopt the use of engagement letter for all engagements.
  2. Develop standard engagement letters for use with various types of engagements.
  3. Specify non-routine procedures that are not included in the engagement.

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© 1998-2001, Duane Reyhl, CPA
E-mail: dreyhl@reyhl.com

Updated: October 26, 2003