Question 1

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 pre- planning. 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 Reasoning: State any legislative or conditions as to why you would take this action.	Action: How would you achieve this policy? Findings: Stated here, detail your findings here Completed: DATE Initials: Your initials

Complete a minimum of four (4) policy and practice requirements and a minimum of two procedures to check each policy. You can use the example provided and you are to assume that you completed the procedure so that you can document your findings.