New Edition of Audit Focus Points a Lens on Engagement Acceptance

Today, the PCAOB released a staff publication, “Audit Focus: Engagement Acceptance."

The decision of whether or not to accept an engagement is a critical part of the audit process. Audit firms have a responsibility to undertake only those engagements that they can reasonably expect to be completed with professional competence.

This edition of Audit Focus highlights key reminders for auditors who audit smaller public companies of PCAOB standards related to engagement acceptance for initial engagements for new clients. The Audit Focus also shares good practices that the PCAOB staff has observed, including the following:

• Assessing Partner Capacity – In both the acceptance and continuance process, audit firms have implemented a “scorecard” where points are assigned to a partner based on the number and type of audits already served to determine whether the partner has capacity to take on additional engagements.

• Implementation of a Pre-Assessment Process – Before bidding on the engagement, audit firms implemented an evaluation team to pre-vet potential engagement prospects to determine whether the engagement is an appropriate fit for the audit firm.
• Use of Templates – Audit firms used templates to help guide a balanced decision on whether or not to proceed with a potential engagement opportunity.

About Audit Focus

Audit Focus is a series of PCAOB publications that aims to provide easy-to-digest information to auditors, especially those who audit smaller public companies. Each edition of Audit Focus reiterates the applicable auditing standards, rules, and/or staff guidance, as well as offers reminders and good practices tailored to PCAOB-registered auditors of smaller companies – all with an eye toward protecting investors and improving audit quality. Previous editions of Audit Focus – which have covered topics such as journal entries, audit committee communications, and critical audit matters – can be found at the PCAOB’s Staff Publications and Information for Smaller Firms pages.