Viswa is a company that provides call centre services for a variety of organizations. It operates in a medium-sized city and your firm is the largest audit firm in the city. Viswa is owned and run by two entrepreneurs with experience in this sector and has been in existence for five years. It is expanding rapidly in terms of its client base, the number of staff it employs and its profits. It is now 15 June 2X10 and you have been approached to perform the audit for the year ending 30 June 2X10. Your firm has not audited this company before. Viswa has had three different firms of auditors since its incorporation.

Viswa’s directors have indicated to you informally that the reason they wish to change auditors is because of a disagreement about certain disclosures in the financial statements in the previous year. The directors consider that the disagreement is a trivial matter and have indicated that the company accountant will be able to provide you with the details once the audit has commenced. Your firm has explained that before accepting the appointment, there are various matters to be considered within the firm and other procedures to be undertaken, some of which will require the cooperation of the directors.

Your firm has other clients that operate call centres. The directors have asked your firm to commence the audit immediately because audited accounts are needed by the bank by 30 July 2X10. Your firm is very busy at this time of year.

Required:

(a) Describe the matters to consider within your firm and the other procedures that must be undertaken before accepting the appointment as auditor to Viswa.

(b) Explain why it would be inappropriate to commence the audit before consideration of the matters and the procedures referred to in (a) above have been completed.

(c) Explain the purpose of an Engagement Letter and list its contents.