Before smaller audit firms accept a new appointment or continue to act for an existing audit client, they need to make sure they have the right resources.
The Audit Registration Committee (ARC) is keen to highlight the need for smaller firms to ensure, when accepting a new audit appointment or continuing to act for an existing audit client, that they have adequate competence and capabilities to undertake the engagement.
This is particularly important if the client (or proposed client) is complex or higher-risk, such as:
AIU publishes its findings
The Audit Inspection Unit’s 2010/11 public report on inspections of firms auditing 10 or fewer entities within its scope (PDF 772/ 16 pages) highlighted a specific concern involving the audits of multi-national groups, where the majority of the operations are based and managed outside the UK.
In a number of instances, the AIU found that the firm undertaking the audit in the UK was, due to its size, not usually affiliated to an overseas firm. As a result, the overseas operations were audited by other firms (component auditors) and the extent of participation of the UK auditor in the group audits was generally limited.
Reminder from the ARC
The ARC reminds firms (as required under ISQC1), that they must establish policies and procedures for acceptance and continuance of client relationships which give reasonable assurance that the firm will only undertake the engagement if it has the capabilities, including time and resources, to do so.