CLIENT / ENGAGEMENT ACCEPTANCE FORM
Client Name:
Balance Sheet Date:
Completed By:
Date:
SECTION A: BASIC CLIENT INFORMATION
1. GENERAL INFORM ATION
Phone:
Street Address:
Fax:
City/State/Zip:
Website:
Direct/Mobile Phone:
Primary Contact:
Title:
Email:
Billing Address:
City/State/Zip:
Billing Attention:
Email:
2. M ANAGEMENT
A) List the principal members of management. (Designate the principal audit contact with an *.)
Name and Title
Name and Title
B) Discuss any factors that should be known about key client management (i.e. experience, age, health, ease of
replacement, etc.):
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2. M ANAGEMENT (continued)
C) List audit committee members and identify the committee chair:
Name
Chair:
Name
Member:
Member:
3. INDUSTRY
A) In what industries does the company operate?
B)
Describe the company’s key products or services, and how the products or services are used:
C) Describe any special regulatory or reporting requirements that apply to companies in the industry:
4. FINANCIAL HIGHLIGHTS
A) Describe historical financial information:
Historical financial information as of
Cash and cash equivalents
Liquid investments
Other current assets
Current liabilities
Debt
Retained earnings (accumulated deficit)
Revenue
Operating income (loss)
Income (loss) before taxes
Cash flow from operations
B) Describe risks related to the nature of the company’s major assets and liabilities:
C) Describe the risks related to the sources of the company’s revenues and marketing methods:
D) Does the Company face liquidity issues (e.g. going concern opinion, loan defaults, etc.):
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5. PUBLIC COMPANIES ONLY
A) Is the potential client an SEC issuer as defined? (if “Yes” continue to questions B-E; if “No” move to next section)
Yes
No
B) Is the potential client (check one): N/A, new Company under formation, no filings required at the time of our
acceptance.
a small business filer (as defined)?
an “S-X” filer (as defined)?
an accelerated filer (as defined)?
a large accelerated filer (as defined)?
C) Is the client current on its public filings?
Yes
No
D) Has the client filed an extension or been delinquent with its 34 Act filings within the last two years?
Yes
No
6. PRIVATE COMPANIES ONLY
A) Does the company expect to become public within two years?
Yes
No
SECTION B: CLIENT PROFILE AND OVERALL PRELIMINARY RISK ASSESSMENT
AREA OF CONSIDERATION
I.
YES
NO
N/A
COMMENTS
RISK FACTORS
Consider whether information you have gathered about the company, its operations, and its industry indicates
incentives or pressures or opportunities for management to intentionally misstate the financial statements. Describe
below if any.
1. Has the potential client ever been audited?
2. Is the size of the accounting department considered reasonable
in relation to the size and the nature of the potential client’s
operations?
Describe the nature of related party transactions, if any.
3. Briefly describe the intended use of the audited or other
financial statements (e.g. sale of company, IPO, creditor
requirements, pending public shell reverse merger, etc.).
4. Briefly describe the organizational structure of the potential client and its accounting department.
5. For prior periods, were the audit opinions other than
“unqualified”? Describe in detail if the answer is “Yes”.
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AREA OF CONSIDERATION
6. Were there any disagreements or other matters reported on
Form 8-K regarding the change in auditors?
YES
NO
N/A
COMMENTS
7. Has the client restated the results of its operations within the
last three years? If so, state the nature and amount of each
restatement.
8. Has the client had any material weaknesses, reportable
conditions or significant unremediated internal control
deficiencies within the last three years?
9. Does the client have an Audit Committee or equivalent?
10. Does the client have an effective internal audit function?
11. Does the client use service organizations? If so, state the
nature and type of services.
II.
M ANAGEMENT INTEGRITY
12. Are there any concerns about management’s integrity based
on contacts or discussions with others?
13. Are there any concerns about management’s integrity based
on reading Form 8-Ks, if applicable, to determine any changes
in officers or directors, including resignations or declinations to
stand for reelection?
14. Are there any concerns about management’s integrity that
might be derived from SEC or other regulatory actions in
process or settled?
III. INDEPENDENCE
15. What services does the company desire from our firm?
Audit of financial statements?
Audit of internal control?
Preparation of tax returns?
(Specify):
Due diligence?
(Specify):
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AREA OF CONSIDERATION
Agreed upon procedures?
(Specify):
YES
NO
N/A
COMMENTS
Other? (Specify):
16. Document consideration of whether the firm is independent of the prospective client by answering the following
questions (for SEC reporting clients). The SEC expects accountants to comply with the independence requirements
established by the Independence Standards Board and the accounting profession (the AICPA), as well as the
requirements promulgated by the Commission and its staff. The SEC’s independence rules are set forth in Rule 201 of Regulation S-X. Rule 2-01’s general standard of independence requires both the fact and the appearance of
independence.
a.
Have all audit and allowable nonaudit services been (or
will be) pre-approved by the audit committee? Explain a
“No” answer.
b.
Has an audit partner received (or is expected to receive)
compensation for procuring engagements to provide
products or services to the client other than the audit,
review, or attest services? Explain a “Yes” answer.
c.
Does the firm, any covered person, or any covered
person’s immediate family members have a direct or
material indirect financial interest in the client or in an
entity over which the client has significant influence?
Explain a “Yes” answer.
d.
Does the client have an interest in our firm; or has the
client been engaged to be an underwriter, broker-dealer,
market maker, promoter, or analyst for the firm’s issuance
of securities? Explain a “Yes” answer.
e.
Have material fees for other services been collected?
(Example: Tax client that now requires audit services)
Explain a “No” answer.
f.
Do the fees for this client, and its related group, represent
a significant portion (≥15%) of the firm’s total revenue?
Explain a “Yes” answer.
g.
Are there any relationships with the prospective client or
conflicts of interests that might impair independence?
Explain “Yes” answers.
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i.
Employment relationships?
ii.
Business relationships?
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AREA OF CONSIDERATION
iii.
Contingent fee or commission arrangements?
iv.
Competing against the client?
v.
Litigation?
vi.
Indemnification?
vii.
Other? (Specify.)
YES
NO
N/A
COMMENTS
17. Have any prohibited non-audit services been performed for
this client? Explain a “Yes” answer.
IV. BACKGROUND CHECKS
18. Have background checks been obtained for:
a. Audit committee chairman
b. Chief Executive Officer
c. Chief Financial Officer
d. Controller
e. Other
19. Have the results of the background checks raised any
concerns about management’s integrity? Describe and attach
background check reports.
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SECTION C: ENGAGEMENT ECONOMICS
Document your consideration of whether the engagement meets the firm’s standards from an economic standpoint.
Document the following:
Proposed budget
Proposed fees
Total engagement hours
Expected realization
$
$
%
SECTION D: PREDECESSOR AUDITOR’S COMMUNICATIONS AND REFERENCES
YES
I.
NO
N/A
COMMENTS
PREDECESSOR’S COMMUNICATION
1. Document the results of communications with the predecessor auditor.
Inquired of
Name
Firm
Title
Date
a. Has the predecessor auditor had disputes with the client about
accounting principles, proposed adjustments, or other significant
matters?
b. Has the predecessor auditor been prevented from applying
necessary auditing procedures?
c.
Does the predecessor auditor have reason to doubt management’s
integrity?
d. Have other auditors refused to serve this client?
e. Are there unpaid fees owed to the predecessor auditor for services
rendered?
f.
Are there any fee disputes with the predecessor auditor?
g. Has management been
predecessor auditor?
domineering
in
dealing
with
the
h. Has management placed unreasonable demands (such as
unrealistic time constraints concerning the audit) on the
predecessor auditor?
i.
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Has the predecessor auditor had any communications with the
client concerning fraud, illegal acts, or internal control related
matters?
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YES NO N/A
COMMENTS
2. Document the identified reasons for a change in auditor and any additional comments based on inquiries of the
predecessor auditor.
3. Based on the above, are there any reasons we should not accept the
client?
II. REFERENCES
4. Are there any concerns about management’s integrity based on
contacts or discussion with the client’s bankers?
Inquired of:
Name
Firm
Title
Date
5. Are there any concerns about management’s integrity based on
contacts or discussion with SEC counsel and/or the client’s attorneys?
Inquired of:
Name
Firm
Title
Date
6. Are there any concerns about management’s integrity based on
contacts or discussion with others having business relationships with
the client?
Inquired of:
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Name
Firm
Title
Date
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7. Has our review of the latest annual and interim financial statements, income tax returns, auditor’s reports, SEC filings,
analysts’ reports, information from rating agencies, press releases, reports to other regulatory agencies, and other
auditor communications, if any, or any other circumstances of which we are aware, provided information that would
cause us to regard the engagement as requiring special attention or presenting unusual risks or that would cause us
not to want to be associated with the potential client? (Specify.)
SECTION E: CLIENT RISK RATING (1 - 30, 1 = lowest score, 30 = highest score)
Considerations of the client risk rating include but are not limited to the following:












Client is a public company, or plans to make an offering (public or private) in the next 12 months.
Client has history of a going concern issue and/or negative cash flow from operating activities.
Client is litigious as a plaintiff.
Client restated its financial statements (interim or annual) and/or amended a Form 10-K or 10-Q at least once in
the past 18 months.
Client actively files registration statements.
Client’s audit committee or Board of Directors does not have any independent members.
Client frequently has complex accounting transactions.
Client is planning to sell the Company within 12 months.
Client has a history of multiple related party transactions.
Client’s market cap is > $6 million.
Client’s quality of accounting records is at times less than adequate.
Client does not always pay audit fees on a timely basis.
Client Risk Rating:
SECTION F: FINAL ACCEPTANCE OR REJECTION
We
should
accept the client / engagement.
should not
Engagement partner name:
Engagement Partner Signature:
X_________________________________________
Date:
Concurring partner name:
Concurring Partner Signature:
X_________________________________________
Date:
.
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