You are a new partner at a PA firm. You recently signed a new contract with Khaki Fabrics to become their auditor. In the process of accepting the client and planning the first year's audit, you did the following:

• Contacted the previous auditor to enquire if there were any reasons not to accept the audit of Khaki Fabrics. Unfortunately, the previous auditor was out of town and did not respond to you before you accepted the client.
• Upon his return, the previous auditor did communicate with you and indicated that Khaki Fabrics had aggressive expense deferral policies that they disagreed on. You asked to review the working papers of the previous auditor with regards to these expenses and found them to be right below the materiality threshold.
• Khaki Fabrics imports most of its fabrics and has two production facilities in Australia. The company therefore has a complex tax structure and many import duties. Since this isnt your area of expertise, you asked another auditing firm to provide the required audit procedures for the international taxes and duties expense. When selecting the other audit firm, you researched the firm online. You also ensured that they had their professional designation and enquired with the CPA and provincial association if the firm had any complaints or litigation outstanding for malpractice.
• Since the bidding process took time with Khaki Fabrics, you had to start the audit almost right after learning you had the winning bid. You did not prepare an engagement letter before starting the work. You do not see this as being a problem since waiting until the audit has begun will provide you with a better idea of what work has to be done and what the engagement letter should include.

Required: Identify the good and bad steps that you have undertaken in reducing your exposure to legal liability.