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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Professional appointments

Harbor & Lane, an audit firm, is invited to tender for the audit of Zentra Ltd. Before submitting the tender, which step is most appropriate for the firm to take first under the IESBA Code and ISQM 1 client acceptance considerations?

The firm should first assess independence, conflicts of interest, competence and resources. These acceptance considerations under the IESBA Code and ISQM 1 must be satisfied before fees are agreed or an engagement letter is issued, because they determine whether the firm can properly accept.

  1. AAssess whether the firm is independent, competent and has the resources and time to perform the engagement, including any conflicts of interestCorrect
  2. BAgree the audit fee with the directors so that the tender is competitive
  3. CContact the previous auditor to ask for the working papers of the prior year audit
  4. DDraft the engagement letter and send it to the directors for signature

Explanation

Before taking on a new client the firm must consider integrity of the client, independence and conflicts, and whether it has the competence, capabilities and resources. Fee agreement and engagement letter come later, and the firm cannot demand the predecessor's working papers as of right.

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