Section 320: Professional Appointments

Section 320: Professional Appointments · Complied AI

• Type of Engagement Explanation: “Attest Functions” for this purpose will include services pertaining to Audit, Review, Agreed upon Procedures and Compilation of Financial Statements. 320.3 A1 Threats to compliance with the principles of integrity or professional behaviour might be created, for example, from questionable issues associated with the client (its owners, management or activities). Issues that, if known, might create such a threat include client involvement in illegal activities, dishonesty, questionable financial reporting practices or other unethical behaviour. 320.3 A2 Factors that are relevant in evaluating the level of such a threat include: • Knowledge and understanding of the client, its owners, management and those charged with governance and business activities. • The client’s commitment to address the questionable issues, for example, through improving corporate governance practices or internal controls. 320.3 A3 A self-interest threat to compliance with the principle of professional competence and due care is created if the team does not possess, or cannot acquire, the competencies to perform the professional services. 320.3 A4 Factors that are relevant in evaluating the level of such a threat include: • An appropriate understanding of: o The nature of the client’s business; o The complexity of its operations; o The requirements of the engagement; and o The purpose, nature and scope of the work to be performed. • Knowledge of relevant industries or subject matter. • Experience with relevant regulatory or reporting requirements. • The existence of quality control policies and procedures designed to provide reasonable assurance that engagements are accepted only when they can be performed competently. • The level of fees and the extent to which they have regard to the resources required, taking into account the chartered accountant’s commercial and market priorities. 320.3 A5 Examples of actions that might be safeguards to address a self-interest threat include: • Assigning sufficient engagement personnel with the necessary competencies. • Agreeing on a realistic time frame for the performance of the engagement. • Using experts where necessary.

(c)

Considers undertaking work that is complementary or additional to that of another accountant. 320.4 A1 There might be reasons for not accepting an engagement. One such reason might be if a threat created by the facts and circumstances cannot be addressed by applying safeguards.

For example, there might be a self-interest threat to

compliance with the principle of professional competence and due care if a chartered accountant accepts the engagement before knowing all the relevant facts. 320.4 A2 If a chartered accountant is asked to undertake work that is complementary or additional to the work of an existing or predecessor accountant, a self-interest threat to compliance with the principle of professional competence and due care might be created, for example, as a result of incomplete information. 320.4 A3 A factor that is relevant in evaluating the level of such a threat is whether tenders state that, before accepting the engagement, contact with the existing or predecessor accountant will be requested. This contact gives the proposed accountant the opportunity to inquire whether there are any reasons why the engagement should not be accepted. 320.4 A4 Examples of actions that might be safeguards to address such a self-interest threat include: • Asking the existing or predecessor accountant to provide any known information of which, in the existing or predecessor accountant’s opinion, the proposed accountant needs to be aware before deciding whether to accept the engagement. For example, inquiry might reveal previously undisclosed pertinent facts and might indicate disagreements with the existing or predecessor accountant that might influence the decision to accept the appointment. • Obtaining information from other sources such as through inquiries of third parties or background investigations regarding senior management or those charged with governance of the client. Communicating with the Existing or Predecessor Accountant (except in case of Audit, Review, Report or any other assignment, as may be prescribed by ICAI from time to time and governed with the provisions of Clause (8) of Part- I of First Schedule to The Chartered Accountants Act, 1949, and Council directions thereunder) 320.5 A1 A proposed accountant will usually need the client’s permission, preferably in writing, to initiate discussions with the existing or predecessor accountant.

R320.6

If unable to communicate with the existing or predecessor

accountant, the proposed accountant shall take other reasonable steps to obtain information about any possible threats.

Communicating with the Proposed Accountant

R320.7

When an existing or predecessor accountant is asked to

respond to a communication from a proposed accountant, the existing or predecessor accountant shall:

(b)

The legal and ethics requirements relating to such communications and disclosure, 320.7 A2 Circumstances where a chartered accountant is or might be required to disclose confidential information, or when disclosure might be appropriate, are set out in paragraph 114.3 A1 of the Code.

Changes in Audit or Review Appointments

R320.8

Subject to provisions of Clause (8) of Part I of First Schedule of the Chartered Accountants Act, 1949, and Council directions thereunder, in the case of an audit or review of financial statements, a chartered accountant shall request the existing or predecessor accountant to provide known information regarding any facts or other information of which, in the existing or predecessor accountant’s opinion, the proposed accountant needs to be aware before deciding whether to accept the engagement.

The existing or predecessor accountant shall provide the

information honestly and unambiguously.

The requirements set out in paragraph R360.22 with respect

to communication with proposed accountant shall also apply.

Client and Engagement Continuance

R320.9

For a recurring client engagement, a chartered accountant

shall periodically review whether to continue with the engagement. 320.9 A1 Potential threats to compliance with the fundamental principles might be created after acceptance which, had they been known earlier, would have caused the chartered accountant to decline the engagement. For example, a self- interest threat to compliance with the principle of integrity might be created by improper earnings management or balance sheet valuations.

Using the Work of an Expert

R320.10

When a chartered accountant intends to use the work of an expert in the course of undertaking a professional activity, the accountant shall determine whether the use is appropriate for the intended purpose. 320.10 A1 Factors to consider when a chartered accountant intends to use the work of an expert include: • The reputation and expertise of and, the resources available to the expert. • Whether the expert is subject to applicable professional and ethics standards. Such information might be gained from prior association with, or from consulting others about, the expert.

Using the Output of Technology

R320.11

When a chartered accountant intends to use the output of

technology in the course of undertaking a professional activity, the accountant shall determine whether the use is appropriate for the intended purpose. 320.11 A1 Factors to consider when a chartered accountant intends to use the output of technology include: • The nature of the activity to be performed by the technology. • The expected use of, or extent of reliance on, the output of the technology. • Whether the accountant has the ability, or access to an expert with the ability, to understand, use and explain the technology and its appropriateness for the purpose intended. • Whether the technology used has been appropriately tested and evaluated for the purpose intended. • Prior experience with the technology and whether its use for specific purposes is generally accepted. • The firm’s oversight of the design, development, implementation, operation, maintenance, monitoring, updating or upgrading of the technology. • The controls relating to the use of the technology, including procedures for authorizing user access to the technology and overseeing such use. • The appropriateness of the inputs to the technology, including data and any related decisions, and decisions made by individuals in the course of using the technology.

Other Considerations

320.12 A1 When a chartered accountant is considering using the work of experts or the output of technology, a consideration is whether the accountant is in a position within the firm to obtain information in relation to the factors necessary to determine whether such use is appropriate.