Background - The Auditor and the Audit Client

Infinity Auditors are Certified Practicing Accountants who are registered company auditors. They service a broad range of clients across Australia however they are known for their work within the medical and pharmaceutical industries. Established in 1986 the firm consists of 8 partners, 50 audit staff and 10 administration staff. You have been an audit senior with Infinity Auditors for 3 years. Infinity Auditors have two offices located in Adelaide and Brisbane.

During the year Infinity Auditors was approached by Medical Services Group Limited (MSG) to complete their 2020 financial year audit. Their financial year ends June 30 and the previous auditor was ABC Auditors. MSG supplies medical equipment to hospitals and doctor surgeries including medical diagnostic testing units, disposable products for surgery and medical safety equipment. They sell a total of 230 stock items ranging from $50 an item to $50,000 an item. They have warehouses in Sydney, Melbourne and Adelaide but ship their products all over Australia. Recently MSG opened another warehouse in Brisbane bringing the total number of warehouses to four. The head office is in Adelaide, and this is where most of the administration staff are located.

Prior to accepting MSG as a client, you need to first assess if they are a suitable audit client for your firm. Develop a Client Engagement Workpaper to be used by Infinity Auditors for their audit preplanning. You are required to look at policy and practice requirements and how you may gather sufficient and appropriate evidence to test with a clearly defined set of procedures. Policy and practice requirements detail the types of checks that you would carry out before accepting the engagement. This section should also state the reasoning that this check is required using appropriate legislation, standards, policies or identification of any potential audit risks. Procedure looks at how you might gather appropriate evidence to test client suitability. Note that you can complete several different procedures for each policy and practice requirement.

Workpaper Example

CLIENT ENGAGEMENT WORKPAPER This workpaper is used to check the suitability of new clients. Audit Client: Lead Auditor: YOUR NAME Policy & Practice Requirements Procedure to be Carried Out Policy: Obtain ethical clearance from previous auditor Action: How would you achieve this policy? Reasoning: State any legislative or conditions as to Findings: Stated here, detail your findings here why you would take this action. Completed: DATE Initials: Your initials