The audit engagement process is a professional negotiation between public accounting firms and prospective clients. This process is used to find new clients and offer various accounting services to businesses. Public accounting firm partners are usually responsible for meeting with potential clients and selling accounting services. Accounting partners typically have a background in tax, audit, general accounting or mergers and acquisitions. Moreover, their wide range of education and experience in their specific accounting field can best assess a client’s accounting operation and tailor their services to meet client needs.
The first step in the audit engagement process is for public accounting firm partners to meet with the client. This meeting introduces the individuals responsible for overseeing the audit to the company’s accounting management staff. The company’s chief financial officer (CFO) and accounting controller are usually the ones responsible for meeting with public auditors and discussing accounting services. Auditors may also review the company’s prior audit reports to determine if any material weaknesses or accounting improprieties existed in previous audits.
After the initial meeting, companies will usually select which accounting services will be done by the public accounting firm. The type of audit, number of auditors, pricing and scope of the audit are typically determined when selecting audit services. Public accounting firms may issue a proposal to the company by written invitation prior to accepting the audit engagement. Most companies are not allowed to use the same public accounting firm for audit engagements and other accounting services, such as assurance, consultation or mergers and acquisitions. Limiting the number of services a public accounting firm can conduct maintains an independent relationship during the audit process.
Scheduled Fieldwork Dates
Many companies have specific dates and times in which audits need to be completed. Many companies need quarterly or annual audits conducted on financial statements released to external business stakeholders. Selecting these dates is an important part of the audit engagement process. Public accounting firms unable to meet specific deadlines for the company can hinder the company’s ability to issue financial statements according to government requirements.
The engagement letter is the final piece of the audit engagement process. This letter recaps all the pertinent information relating to the accounting or audit services and includes specific details for when the audit will be complete. This letter is usually signed by the audit partner and the chief financial officer of the company; publicly held companies may also make a copy of this letter available to their lenders or investors. External business stakeholders consider this information extremely important since the quality of audit services usually depends on the experience and track record of the public accounting firm.