The engagement decision in medium audit practice in South Africa

Abstract

The decision to accept an appointment as registered external auditor to an audit client (the engagement decision) has in recent years been subject to an increased level of professional care and consideration, mainly as a result of previous experiences of engagement decisions that have led to audit practitioners suffering significant financial losses and litigation exposure, as well as significant amendments to statutory regulation and new International Standards on Auditing. The engagement decision is affected by a number of factors or motivational drivers. The purpose of this article is to discuss some of these factors related to the audit practitioner’s business that may be grouped together under the headings of commercial, professional and organisational considerations. The article further reports on the extent to which auditors in medium audit practice in South Africa considers the three groups of considerations during the engagement decision, based on questionnaire results. Lastly, the article comments on the need for a balanced approach to the three groups of considerations to manage the auditor’s business risk associated with the engagement decision.