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4080 Examination Approval
Nov-2018
Overview
Before the audit team can proceed to the examination phase, the team must confirm that the requirements of the planning phase have been met. The examination approval is a process conducted in the audit working paper software to ensure that key requirements are completed, before proceeding to the next stage of the audit.
CSAE 3001 Requirements
24. The practitioner shall accept or continue a direct engagement only when: (Ref: Para. A31-A34)
(a) The practitioner has no reason to believe that relevant ethical requirements, including independence, will not be satisfied;
(b) The practitioner is satisfied that those persons who are to perform the engagement collectively have the appropriate competence and capabilities (see also paragraph 36); and
(c) The basis upon which the engagement is to be performed has been agreed, through:
(i) Establishing that the preconditions for a direct engagement are present (see also paragraphs 26-27); and
(ii) Confirming that there is a common understanding between the practitioner and the engaging party of the terms of the engagement, including the practitioner’s reporting responsibilities.
30. The practitioner shall seek the responsible party's written acknowledgment of responsibility for the underlying subject matter. If the practitioner does not obtain such acknowledgment, the practitioner shall:
(a) obtain other evidence that the responsible party is responsible for the underlying subject matter, such as a reference to legislation or a regulation; and
(b) consider how the lack of the responsible party's written acknowledgment might affect the practitioner's work and conclusion.
31. The practitioner shall seek to obtain from the responsible party, written acknowledgement that the criteria are suitable for the engagement. When such acknowledgement cannot be obtained, the practitioner shall consider the effect, if any, on the practitioner’s work and report.
36. The engagement partner shall: (Ref: Para. A68)
(a) Be satisfied that those persons who are to perform the engagement collectively have the appropriate competence and capabilities to:
(i) Perform the engagement in accordance with relevant standards and applicable legal and regulatory requirements; and
(ii) Enable an assurance report that is appropriate in the circumstances to be issued.
(b) Be satisfied that the practitioner will be able to be involved in the work of:
(i) A practitioner’s expert where the work of that expert is to be used; and (Ref: Para. A69-A70)
(ii) Another practitioner, not part of the engagement team, where the assurance work of that practitioner is to be used, (Ref: Para. A71-A72)
to an extent that is sufficient to accept responsibility for the assurance conclusion on the underlying subject matter.
38. Throughout the engagement, the engagement partner shall remain alert, through observation and making inquiries as necessary, for evidence of non-compliance with relevant ethical requirements by members of the engagement team. If matters come to the engagement partner’s attention through the firm’s system of quality control or otherwise that indicate that members of the engagement team have not complied with relevant ethical requirements, the engagement partner, in consultation with others in the firm, shall determine the appropriate action.
44. The practitioner shall plan the engagement so that it will be performed in an effective manner, including setting the objective, scope, timing and direction of the engagement, and determining the nature, timing and extent of planned procedures that are required to be carried out in order to achieve the objectives of the practitioner. (Ref: Para. A2-A3, A85-A89)
49. The practitioner shall consider significance when: (Ref: Para. A90-A98)
(a) Planning and performing the assurance engagement, including when determining the nature, timing and extent of procedures; and
(b) Evaluating whether the underlying subject matter is free from significant deviation.
51R. The practitioner shall obtain an understanding of the underlying subject matter and other engagement circumstances sufficient to:
(a) Enable the practitioner to identify and assess the risks of significant deviation; and
(b) Thereby, provide a basis for designing and performing procedures to respond to the assessed risks and to obtain reasonable assurance to support the practitioner’s conclusion. (Ref: Para. A99-A103, A105-A109)
52R. In obtaining an understanding of the underlying subject matter and other engagement circumstances under paragraph 51R, the practitioner shall obtain an understanding of internal control relevant to the engagement. This includes evaluating the design of those controls pertinent to the objective of the engagement and, if relevant, determining whether they have been implemented by performing procedures in addition to inquiry of the personnel responsible for the underlying subject matter. (Ref: Para. A105-A108)
54R. The practitioner’s assessment of the risks of significant deviation may change during the course of the engagement as additional evidence is obtained. In circumstances where the practitioner obtains evidence which is inconsistent with the evidence on which the practitioner originally based the assessment of the risks of significant deviation, the practitioner shall revise the assessment and modify the planned procedures accordingly. (Ref: Para. A114)
CSAE 3001 Application Material
Related application material has been included in other sections of the manual.
OAG Policy
The audit team shall obtain approvals at the end of the planning phase to confirm that the audit can proceed to the examination phase. [Nov-2015]
The engagement leader shall ensure that required reviews and consultations have taken place during the planning phase of the audit, and have been properly documented. [Nov-2015]
The engagement leader shall ensure that detailed budgets to enable the audit to be completed within the set timelines have been prepared and justified. [Nov-2015]
OAG Guidance
What CSAE 3001 means for examination approval
CSAE 3001 requires that
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the audit team collectively has the appropriate competence and capabilities to perform the audit in accordance with OAG policies and standards for assurance engagements. This evaluation is done during the engagement risk assessment (OAG Audit 4020 Risk assessment);
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the audit has been planned to ensure that it will be performed in an effective manner, by setting the objective, scope, timing, and direction of the audit, and determining the nature, timing, and extent of planned procedures required to conduct the audit. This is done by preparing the audit logic matrix (OAG Audit 4044 Developing the audit strategy: audit logic matrix) and audit programs (OAG Audit 4070 Audit programs);
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the audit team has considered significance when planning the engagement (OAG Audit 2020 Significance), the significance of the subject under audit, and whether it is free from significant deviation. This is done during the subject matter risk assessment (OAG Audit 4020 Risk assessment);
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as new evidence is obtained during the examination phase, the audit team continues to monitor the risk of significant deviation to ensure that the initial assessment does not change. If there are changes, the assessment will need to be revised and planned procedures could be modified (as appropriate);
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audit team members comply with relevant ethical requirements, including independence with respect to the audit and that monitoring is conducted throughout the audit to ensure that audit team members continue to comply with these requirements (OAG Audit 3031 Independence);
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the audit team has conducted procedures to obtain an understanding of internal controls relevant to the audit (OAG Audit 4025 Internal controls); and
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the audit team has confirmed the terms of the engagement and has sought to obtain a written acknowledgement from the audited entity that it is responsible for the subject matter and that the audit criteria are suitable for the engagement. This is done when the audit plan summary (OAG Audit 4090 Audit plan summary for performance audits) or the special examination plan (OAG Audit 4100 Special examination plan) is sent to the entity.
The examination approval requires sign-offs in the audit working paper software on all these areas related to standards, but also on two other elements that are directly related to OAG policies on consultations and budgets.
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Before starting the examination phase of the audit, the engagement leader should ensure that all the required reviews and consultations have taken place and that the advice received has been documented and addressed (OAG Audit 3081 Consultations).
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The engagement leader should also ensure that detailed budgets to enable the audit to be completed within the set timelines have been prepared and justified (OAG Audit 2010 Project management).
Examination approval sign-offs need to be completed in the audit working paper software.
Next steps
After signing-off that the required planning work has been completed, the examination phase can proceed.