Acca aa s21 Notes

2. The appointment process: before you say ‘Yes’…
Auditors must exercise great caution if asked to be the auditors of an organisation.
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Are they professionally qualified to act? Is it legal and ethical for them to do so? For example, 
they shouldn’t accept an appointment if the fees exceed the 15% limit for public interest 
companies, unless there are adequate safeguards.
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Do they have adequate resources in terms of staff, time, and expertise? If the potential audit 
client acts in a specialist area of business and the auditors have no prior experience of that, it 
would be very unwise for them to accept the appointment.
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Investigate the client, its management, and directors. Many firms of auditors have access to 
databases which, for example, will allow them to search on directors’ names to see if any of the 
directors have been banned from being directors of companies because of their past behaviour. 
They may discover that it is too risky to become the auditor of a company if they have no trust in 
the honesty of the directors. The audit fee is often modest, why risk your reputation by 
undertaking an audit where the directors may be fraudulent?
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Communicate with present auditors. There is a professional requirement to do this and it is 
essential to find out why the old auditors are retiring or being removed.
3. 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 
might have to rely on information from other sources.
A new audit appointment does not require the old auditor's consent. If the existing auditor does not 
reply, the new auditor can write that they will assume 'no matters' unless they receive a reply within a 
stated period (e.g. seven days).
A proposed auditor is not expected to refuse to act merely on the grounds of unpaid fees owing to 
the existing auditor.