Professional Practice and Communication
Professional Practice and Communication tests how you run an engagement and how you write and speak about it: acceptance, documentation, professional scepticism, communication with those charged with governance, and clear reporting of findings.
Core rules
- Acceptance and continuance: assess client integrity, competence and independence before signing; record the decision.
- Engagement letter: sets scope, responsibilities, deadlines, fees and the basis of reporting, and is signed before work starts.
- Professional scepticism: question inconsistent evidence, challenge management bias, and document the challenge and the conclusion.
- Documentation: sufficient for an experienced auditor with no prior connection to the engagement to understand the work, the evidence and the judgements.
- Communication with governance: report significant findings, material weaknesses and disagreements, in writing where required.
- Report writing: structure as issue, criteria, evidence, effect and recommendation.
Worked example
The auditor finds inventory overstated because slow-moving items were not written down. The written communication to the audit committee states: the issue (write-down not recognised); the criterion (IAS 2 lower of cost and NRV); evidence (ageing report, post-year-end sales below cost); the effect (profit and inventory overstated by 120,000,000 KZT); and the recommendation (adjust the accounts, revise the provisioning policy, add quarterly review). The conclusion is recorded in the file even if management accepts the adjustment.
Traps
- Relying on an oral assurance from management without documenting the discussion.
- Writing hedged reports that omit the quantified effect.
- Disclosing client information in marketing or networking.
- Accepting a scope restriction instead of modifying the conclusion.