Auditors should only accept a new audit engagement when it has been confirmed that the preconditions for an audit are present

What does the auditor take into consideration?

In considering this, the auditor should have assessed the nature of the entity, the nature and purpose of the financial statements and whether law or regulation prescribes the applicable reporting framework.

firm should have obtained the agreement of Prancer Construction Co's management that it acknowledges and understands it responsibility for the following (2) Eg internal control

For such internal control as management determines is necessary to enable the preparation of financial statements which are free from material misstatement, whether due to fraud or error

firm should have obtained the agreement of Prancer Construction Co's management that it acknowledges and understands it responsibility for the following (1) Eg fair presentation

Preparation of the financial statements in accordance with the applicable financial reporting framework, including where relevant their fair presentation.

How to assess if preconditions are present

To assess whether the preconditions for an audit are present, Cupid & Co should have determined whether the financial reporting framework to be applied in the preparation of Prancer Construction Co's financial statements is acceptable.

firm should have obtained the agreement of Prancer Construction Co's management that it acknowledges and understands it responsibility for the following (2) Eg assess to

To provide Cupid &Co with access to all relevant information for the preparation of the financial statements, any additional information which the auditor may request from management and unrestricted access to personnel within Prancer Construction Co from whom the auditor determines it necessary to obtain audit evidence.