BFA713 - Assessment Task 1: Letter of engagement

Assessment Task 1: Letter of engagement (10% weighting) - Individual

Task Description

This is an individual assignment to prepare a Letter of Engagement setting out your expectations and the scope, roles and responsibilities and other terms (such as deadlines and ethical conduct) to be agreed upon, before the commencement of your group work research assignment task (AT2).

You will work in pairs to complete assignment task 2 (AT2) so it is important to first clearly define your own expectations for a working relationship and to conduct a preliminary scope of the work to be completed for AT2. Auditors undertake similar pre-engagement activities before taking on an audit.

As this is an Auditing assignment you should include a brief evaluation of relevant audit and assurance concepts and principles, as well as an overview of the regulatory and ethical environment to provide a preliminary assessment of the types of risk you will need to research for AT2. This is also your chance to do your own risk assessment before committing to work with a classmate. Once you have submitted your letter of engagement to MyLO it will be a useful tool to find and further negotiate expectations with a suitable team member.

Detailed guidelines to start the assessment:

1. Find one of your classmates that you would like to do the assignment with. This is an individual However, you will need a team mate to do Assignment tasks 2 and 3, which are group based. Once you have a group (2 members in one group), please select one of the ASX companies and register your group on MyLO by Week 2.
2. As you would now have a company selected, you can begin drafting the engagement letter for the client for the audit of general purpose financial report (your client will be the company that you have selected in your group).

What to include in the Letter of Engagement

Your engagement letter needs to cover all of the following information (Note: there are items on the list that may not always be presented in an actual engagement letter, this is for education purposes only).

1. The objective and scope of the audit as discussed with the client (your client is the company selected)

2. The board's responsibility for the subject matter of the audit

3. Discuss the deadlines and the appropriate ethical and regulatory standards that will be applied. Do consider company and industry level standards as well.

4. Your assessment of the issues and risks that may impact this year's audit - you could apply preliminary SWOT analysis or PEST analysis and include this in the engagement letter (this has to be client specific data, including research to support why scoping of audit is important and then applying it to the client's case to show how this will be applied to the client)

5. The letter must outline the strengths and weaknesses of conducting financial statement audit.

6. How will the results of this audit engagement be communicated