Financial Crime World

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Pre-Engagement Activities

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The purpose of pre-engagement activities is to ensure that auditors have considered any events or circumstances that may adversely affect their capability to plan and perform the audit engagement, thereby reducing audit risk to an acceptably low level.

Snapshot of Pre-Engagement Activities (Figure 3.1)

Pre-Engagement Activities Outline

The following pre-engagement activities are outlined:

  • Mandate for financial audit: The SAI Bhutan has a mandate to conduct audits of all public sector entities.
  • Annual Plan of SAI: The SAI Bhutan develops an annual plan that outlines the scope and objectives of its audit engagements.
  • Entity identified for financial audit: The SAI Bhutan identifies entities to be audited, which in this case are all public sector entities.
  • Assessing whether pre-conditions for an audit are present: The auditor assesses whether the conditions necessary for an audit are present, such as sufficient information and access to records.

Pre-Engagement Activities

Key Tasks

Auditors should perform the following key tasks:

  • Assess pre-conditions for an audit: Determine if there are sufficient information and access to records.
  • Identify potential risks: Identify any events or circumstances that may affect the audit engagement, such as risk of material misstatement due to fraud or error.
  • Review accounting system and internal controls: Review the entity’s accounting system, internal controls, and other relevant matters.
  • Evaluate risk of material misstatement: Evaluate the risk of material misstatement due to fraud or error.

By performing these pre-engagement activities, auditors can plan and perform the audit engagement effectively, reducing audit risk to an acceptably low level.