case study ABC & Co$.,$ a medium$-$sized manufacturing company, has approached your audit firm to conduct an independent audit of their financial statements for the year ended December $31,2023.$

The company's management is looking to obtain an unqualified audit opinion to present to their stakeholders.

Pre$-$Engagement Steps:

$1.$ Initial Contact: The company's CFO, Mr$.$ John, contacts your firm to inquire about audit services.

$2.$ Preliminary Discussion: Your firm's partner, Ms$.$ Sarah, has a phone call with Mr$.$ John to discuss the scope of work, timeline,

$3.$ Proposal Submission: Your firm submits a proposal outlining the scope of work, approach, timeline, and fees.

$4.$ Background Check: Your firm conducts a background check on ABC & Co$.$ to identify any potential risks or conflicts of interest.

Initial Engagement Letter Phase:

$1.$ Engagement Letter: Your firm prepares an engagement letter outlining the terms of the audit engagement, including:

$-$ Scope of work

$-$ Objectives

$-$ Responsibilities

$-$ Timeline

$-$ Fees

$-$ Terms of payment

Questions for Discussion:

$1.$ What procedures would you perform during the background check to identify potential risks or conflicts of interest?

$2.$ How would you verify the integrity and reputation of ABC & Co$.\text{'}$s management and those charged with governance?

$3.$ What sources of information would you use to research ABC & Co$.\text{'}$s history, financial performance, and industry reputation?

$4.$ How would you assess the company's complexity, risk profile, and materiality thresholds to determine the appropriate scope and approach for the audit?

$5.$ What independence and objectivity requirements would you need to fulfill to ensure the audit engagement is free from conflicts of interest?

$6.$ What are the essential terms and conditions that should be included in the engagement letter?

$7.$ How would you determine the scope of work and objectives for this audit engagement?