Describe what you believe is implied by the term “engagement risk.” What are the key factors likely considered by Deloitte and other audit firms when assessing engagement risk? How, if at all, are auditors’ professional responsibilities affected when a client proposes a higher than normal degree of engagement risk? I believe that the term “engagement risk” implies that inherent client-specific risks face an auditor throughout the course of an audit, thus creating a risk that the auditor will be unable to successfully assess and manage these risks in the performance of the engagement and properly issue an appropriate opinion. The auditor must understand these client-specific risks, which include, but are not limited to, significant events that affect the operations of the client, business risks facing the client, high-risk areas that require complex or subjective accounting treatments, and timely completion of the audit. (Louwers 112) When a client proposes a higher than normal degree of engagement risk, the focus on the auditors’ professional responsibilities becomes even more imperative, as it is critical that the auditor perform at the highest level to provide the greatest possible assurance that the financial statements are presented fairly, in all material respects.
What quality control mechanisms should major accounting firms have in place to ensure that audit partners have the proper training and experience to supervise audit engagements?
In any major accounting firm, ensuring that audit partners are qualified to supervise and audit engagement begins at the “top” of the organization and should be expressed through the actions of the firm. Partners should always be promoted and assigned to engagements based on their experience, training, and overall qualifications; never should promotions or assignment be based on anything other than absolute competency. Also, promotions and other considerations for employees and partners should be based on the...
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