Acca aaa s21 Notes

politically exposed persons
. These are people who have or who have had positions 
of political influence. For example, politicians, senior military personnel, senior civil servants. 
Unfortunately, there is a history of many of these individuals having profited from corruption 
and they might still have influence that permits the misuse of public funds, the improper 
awarding of contracts and large-scale money laundering.
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The potential client’s credit-rating.
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Preconditions for the audit: will the 
financial reporting framework
used be acceptable and do 
management understand and accept their 
responsibilities
for preparing the financial 
statements and for supplying the auditors with all the information they require? 
September 2021 to June 2022 exams
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5. Communication with existing auditors
If the auditor is approached by new audit client, if it’s a new business and this is the first audit there 
will be no previous auditors to communicate with and new auditors must make their own decision.
If it is not a new business and there is an existing auditor then the new auditor must ask the client for 
permission to contact the old auditor. If permission is not given, the appointment should be declined. 
Why would permission not given? Is a client trying to conceal something? Why else would they not 
allow a new auditor to communicate with the existing auditor?
Assuming permission is given the new auditor will write to the old auditor for information. The old 
auditor can’t simply send that information to the new auditor because that is confidential, and the old 
auditor has to ask the client for permission in turn. If that permission is not given the new auditor 
should decline the appointment because again the client is trying to stop communication between 
the old and new auditors.
If the old auditor provides information then the new auditor is more fully equipped to make their 
accept or reject decision. If the existing auditor decides not to provide information the new auditor 
should try to persuade the old auditor to provide it, but otherwise might have to rely on information 
as been found in other ways.