Terms of appointment and further guidance 1 July 2021

Appendix 7: Expectations on handover of audits

1. This appendix is applicable to all audits completed prior to the change of an auditor.

2. PSAA recognises that changing the appointment of the external auditor to an audited body could present difficulties for the audited body and both the outgoing and incoming auditors if not properly managed. In order to minimise disruption to all parties, and maximise the transfer of the outgoing auditor’s knowledge of the audited body, PSAA expects the following:

  • co-operation between the outgoing and incoming auditor to ensure that the incoming auditor is fully briefed on the specific audit issues facing the audited body;
  • co-operation between the outgoing and incoming auditors to determine responsibility for undertaking specific pieces of audit work in the lead up to, or period immediately following, handover and advise the audited body accordingly;
  • where appropriate, co-operation between the outgoing and incoming auditor to ensure that the incoming auditor is fully briefed on the wider issues facing the audited body; and
  • timely communication by the incoming auditor to the audited body, as soon as possible after formal appointment, of the contact details of the audit team and future audit arrangements, requirements and expectations.
Good practice by incoming auditors

3. The incoming auditor should consider:

  • establishing early contact with key officers and Those Charged with Governance;
  • holding a pre-meeting between the audited body and the new audit team, to specify relationships, exchange information and agree the way forward;
  • producing a detailed listing of their expectations in relation to working papers, timescales and contact points in advance of the audit; and
  • conducting a workshop on the presentation of accounts and working papers to the audited body.
Co-operation between auditors

4. The outgoing and incoming auditors are expected to have a joint meeting prior to the handover.

5. A joint meeting with the audited body during the handover period may be helpful, depending on local circumstances.

6. Where an incoming auditor is considering a Prior Year Adjustment to the financial statements they should consider whether it would be helpful to discuss with the outgoing auditor.

Use and provision of information

7. The outgoing auditor should be prepared to assist the incoming auditor with timely oral or written explanations to assist the latter’s understanding of the audit and any audit working papers provided.

8. The incoming auditor’s requests for access to relevant information need to be timely to minimise the cost/burden on both the outgoing auditor and the audited body.

9. The outgoing auditor should make it clear in writing that information provided is for audit purposes only and must not be disclosed to a third party (including the audited body), unless required by a legal or professional obligation.

10. The incoming auditor should not comment on the quality of the outgoing auditor’s work unless required to do so by a legal or professional obligation.

11. Where considered appropriate, the incoming auditor should place reliance on work undertaken by the outgoing auditor. Judgement by the incoming auditor will need to be applied in determining what is considered to be an appropriate level of reliance. However, it is expected that the incoming auditor will ensure that sufficient documentation and information is requested from the outgoing auditor to enable him or her to place the maximum reliance on work previously undertaken.

12. Any decision not to place reliance on the outgoing auditor’s work should be documented and include the incoming auditor’s justification for this decision.

13. On receipt of a written request, the outgoing auditor should allow the incoming auditor to review the previous year’s audit file. The outgoing auditor should also arrange for copies of the following to be passed to the incoming auditor on request:

  • Specific audit outputs – for up to 6 years prior to handover. These should include:
    • the audit plan;
    • annual audit letters;
    • any other reports prepared by the auditor;
    • public interest reports (and details of any other instances when the outgoing auditor has exercised his/her statutory powers);
    • annual ISA (UK&I) 260 (or equivalent) report including reports on accounting systems weaknesses; and
    • annual reports on accounts including opinion and certificate pages.
  • Correspondence – for up to 6 years prior to handover:
    • Copies of correspondence with members, officers, the public and others relating to the accounts and the audit.
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