A1 · Acceptance & continuance

Verify the client's legal name, assumed/DBA names, and entity type by reviewing applicable organizational and registration records, such as Articles of Incorporation/Organization, Secretary of State records, DBA/Fictitious Business Name filings, business licenses, IRS EIN confirmation (CP575 or 147C), and prior-year engagement documentation, as applicable. Compare the information to the engagement letter and other client-provided records. Document any differences or exceptions in Notes / work performed.

Identify owners, members, shareholders, directors, officers, and/or those charged with governance, and key members of management. Review applicable ownership records, operating agreement/bylaws, corporate or governing-body records, organizational charts, Secretary of State officer/director listings, and prior-year documentation, as applicable. Inquire of management where records are incomplete. Document changes from the prior period and any inconsistencies among sources.

Obtain an understanding of principal operations, significant locations, industry, and the nature of services requested. Review, as applicable, prior-year financial statements, trial balance or general ledger summaries, major contracts, the entity's website or other reliable public information, industry/regulatory information, and management inquiry. Document significant changes that may affect acceptance or continuance, and any differences among sources.

Identify known related parties and affiliates at a level sufficient for conflict and independence screening (not a complete related-party audit). Review, as applicable, related-party notes in prior financial statements, ownership records, organizational charts, contracts with affiliates, and management inquiry. Document parties identified and any disagreement among sources.

Understand why the engagement is requested and, if applicable, why there is a change in auditor. Inquire of management and, where appropriate, those charged with governance. Review, as applicable, board minutes, correspondence about the appointment, and predecessor-related information. Document the reasons obtained and any matters that raise acceptance concerns. If explanations conflict, document the difference as an exception.

Consider the regulatory or reporting environment that affects the engagement. Review, as applicable, license or grantor requirements, regulatory filings, prior reports, and management inquiry about regulators, lenders, or other users. Document reporting or licensing conditions that affect scope or acceptance, and any information that does not agree with client representations. Record differences as exceptions.

Determine whether background information is sufficient to perform the remaining acceptance procedures. Review the information obtained in A1.01-01 through A1.01-06 and client-provided records. List information still needed, who will obtain it, and any gaps or exceptions. Do not treat background gathering as a substitute for evaluating integrity, independence, resources, or terms.

Evaluate information relevant to the integrity of management and, as applicable, owners and those charged with governance. Inquire of management and, where appropriate, those charged with governance. Review, as applicable, prior-year reports, public or regulatory information that is reasonably available, and predecessor communication if there is a predecessor. Document sources used and whether the information raises integrity concerns. Isolated unfavorable facts do not automatically require declining the engagement; unresolved integrity concerns may.

Consider prior financial reporting issues, restatements, withdrawn or modified reports, or known disputes with accountants or regulators, if such information is obtained. Review, as applicable, prior-year financial statements and accountant/auditor reports, management letters, and correspondence. Document issues identified and how they affect acceptance. If none are identified from the sources reviewed, document that result and the sources. Record inconsistencies among sources as exceptions.

Consider litigation, investigations, or regulatory actions that may bear on integrity or association risk. Inquire of management and review, as applicable, legal correspondence provided by the client, prior financial-statement contingencies notes, and reasonably available public or regulatory information. Document matters identified, sources, and any information that does not agree with management's representations. Record disagreements as exceptions.

Consider allegations or indications of fraud, illegal acts, or other misconduct, including the source and credibility of the information. Inquire of management and, where appropriate, those charged with governance. Review, as applicable, prior reports, correspondence, and other information obtained during acceptance. Document allegations considered and the effect on acceptance. Do not treat rumor as fact; follow up on significant items. Record unresolved allegations as exceptions.

Consider disagreements with a predecessor accountant/auditor and the reasons given for a change in auditor, when a predecessor exists. Inquire of management and review, as applicable, predecessor correspondence (see A1.05) and board minutes. Document disagreements or reasons for change and whether they affect integrity or acceptance. If there is no predecessor, document N/A with the basis.

Consider management's attitude toward internal control, accounting policies, and financial reporting, based on inquiries and other information obtained—not speculation. Inquire of management. Review, as applicable, prior management letters, prior reports, and correspondence about accounting policies. Document observations and any attitude or restriction that raises acceptance concern. Record conflicts between inquiry and prior reports as exceptions.

If significant integrity concerns arise, consult within the firm before acceptance. Document the consultation, persons involved, information evaluated, and the basis for the integrity evaluation as it affects acceptance. Do not conclude that management is “honest” in the abstract; conclude whether information obtained is consistent with accepting or continuing the engagement. Record unresolved integrity concerns as exceptions.

Identify the attest client and other persons/entities that must be considered for independence, including affiliates when applicable under the AICPA Code. Review, as applicable, ownership records, organizational charts, related-party listings from A1.01, and firm independence guidance. Document the independence scope. If affiliates or owners are unclear, document the gap and follow up before concluding independence.

Consider financial, business, employment, and family relationships of the firm and covered persons. Review, as applicable, firm independence/conflict records, personnel independence questionnaires or representations, and inquiry of the engagement partner and relevant personnel. Document relationships identified. If a relationship is prohibited or unclear, document it as an exception or consultation item—do not mark completed without evaluating it.

Consider nonattest services, unpaid fees, and other circumstances that may create threats. Review, as applicable, firm engagement and billing records, proposed or existing service agreements, and inquiry of firm personnel. Document services and fee circumstances considered. Record any prohibited service or unpaid-fee issue as an exception and its effect on acceptance.

Evaluate identified threats (self-interest, self-review, advocacy, familiarity, undue influence, and others as applicable) and whether any safeguards would reduce them to an acceptable level. Review the relationships and services identified above and firm policy. Document threats, safeguards evaluated, and whether a safeguard is actually effective. Do not assume a safeguard exists without evaluating it. Record threats that cannot be reduced to an acceptable level as exceptions.

Obtain independence representations or equivalent confirmations from relevant engagement personnel, as required by firm policy. Review completed questionnaires/representations and compare them to firm records. Document who confirmed and the date. If a representation is missing, incomplete, or inconsistent, document the exception and do not conclude independence until resolved.

Consult or escalate when the conclusion is unclear or a prohibited relationship may exist. Document the consultation, persons involved, and resolution. Review consultation notes and firm ethics/independence resources, as applicable. If consultation is not needed, document that the conclusion was clear on the information obtained. Record unresolved prohibited-relationship questions as exceptions.

Document whether the firm can comply with applicable independence and ethics requirements if the engagement is accepted, including unresolved threats. Base the conclusion on the evaluation in A1.03-01 through A1.03-06, not on checking this box. If independence cannot be achieved, document why the engagement should not be accepted as an audit under GAAS.

Identify names and aliases of the client, owners, management, and known related parties/affiliates for conflict screening, using information from A1.01. Review client-provided listings, organizational records, and prior-year documentation, as applicable. Document the names searched. If the listing is incomplete, document what is missing before relying on the search.

Search firm records of existing clients, engagements, and known relationships using the names obtained. Review the firm's client/conflict database or equivalent internal records. Document what was searched, when, and by whom. If records cannot be searched, document the limitation as an exception.

Consider competing, adverse, or other conflicting interests identifiable from firm records or personnel (for example, representing another party in a dispute with the client). Inquire of relevant partners/personnel and review firm records, as applicable. Document conflicts or potential conflicts identified, or that none were identified from the search performed. Record identified conflicts as exceptions until resolved.

Record conflicts identified, including who identified them and when, or document that the search did not identify a conflict. “No conflict identified” is supportable only if a search commensurate with the names obtained was actually performed. Attach or reference search results, as applicable. If the search was incomplete, document that limitation as an exception.

If a conflict is identified, evaluate whether it can be resolved with disclosure, consent, staffing changes, or other safeguards permitted by professional standards and firm policy—or whether the engagement should be declined. Document the proposed resolution, consultation, and conclusion. If no conflict was identified, document that this step is N/A.

Update the conflict check if new related parties or owners are identified before acceptance is finalized. Compare later A1.01/A1.09 information to the names already searched. Document additional searches or that no new names were identified. Record any newly identified conflict as an exception until resolved.

Determine whether a predecessor auditor exists (including a prior auditor who reported on the most recent financial statements). Inquire of management and review, as applicable, prior-year reports, engagement documentation, and board minutes. Document the predecessor's name and firm, or the basis for concluding there is no predecessor. Distinguish “no predecessor” from “not yet determined.” If sources disagree, document the difference as an exception.

If there is no predecessor, document that predecessor communication is not applicable and the basis (for example, newly formed entity or first-time audit with no prior auditor). Do not mark communication as performed. If a predecessor exists, mark this item N/A and complete A1.05-03 through A1.05-05.

If there is a predecessor, request that management authorize the predecessor to respond fully. Obtain written or other documented authorization. If management refuses, document the refusal and consider the implications for integrity and acceptance. If there is no predecessor, mark N/A.

If there is a predecessor, communicate regarding integrity of management, disagreements, fraud or illegal-act concerns, internal-control related matters, scope limitations, and the predecessor's understanding of the reason for the change. Document the request, date, method, and response or nonresponse. Review the predecessor's response and note limitations. If there is no predecessor, mark N/A.

Document the authorization, communication, response or nonresponse, any limitations, and the effect on the acceptance decision. Retain contemporaneous notes or written responses. Incomplete communication or management refusal to authorize a response may be a reason to decline. If there is no predecessor, mark N/A with the basis in A1.05-01/02.

Identify the competence needed for this engagement, including industry, applicable financial reporting framework, and GAAS knowledge, and any specialized accounting or regulatory knowledge. Review the client's industry, framework, and reporting needs from A1.01/A1.08 and compare to firm capabilities. Document skills needed and any competence gap.

Identify the proposed engagement partner, manager/senior, and staff, and consider availability through the expected reporting date. Review firm scheduling/calendars and a proposed staffing plan. Document names or roles and availability. If named personnel are unavailable, document the gap and how it will be closed or why the engagement should be declined.

Consider whether specialists (valuation, IT, tax, actuarial, or others) or an engagement quality review are needed and available, and independent as required. Review the nature of the entity, significant estimates, and firm EQR policy. Document specialists/EQR needed, availability, and any inability to obtain them. Record an inability to obtain required specialists or EQR as an exception.

Compare a realistic time budget to deadlines imposed by the client, lenders, regulators, or grantors. Review proposed fieldwork/report dates, the draft engagement letter timing, and calendar constraints. Document the budget versus deadline. If the timetable is not realistic, document the effect on acceptance as an exception.

Conclude whether the firm has sufficient competence and resources to perform the audit in accordance with GAAS within the expected timetable. Base the conclusion on A1.06-01 through A1.06-04. If resources are insufficient, document whether resources will be obtained, or why the engagement should be declined. Do not accept an audit the firm cannot perform.

Determine whether management understands its responsibilities for the preparation and fair presentation of the financial statements and for internal control relevant to that preparation. Inquire of management and, where appropriate, those charged with governance. Review the draft engagement letter terms. Document responses. If management does not accept these responsibilities, document the exception and the effect on acceptance.

Determine whether management will provide access to records and information relevant to the financial statements, additional information requested, and unrestricted access to persons within the entity, including those charged with governance. Inquire of management. Document the primary contact and expected cooperation. Record any access limitation as an exception.

Determine whether management is willing to provide written representations at the conclusion of the audit. Inquire of management and review draft engagement-letter language, as applicable. Document the response. If management is unwilling, document the exception and whether an audit can be accepted.

Identify any proposed restrictions on scope, locations, systems, or communications. Inquire of management and review correspondence or draft terms. Document restrictions identified. A limitation that would lead to a disclaimer may mean the engagement should not be accepted, except in limited circumstances contemplated by the standards. Record disagreements with management about access.

Conclude whether AU-C 210 preconditions relating to management responsibilities and access appear present, and whether expected cooperation is adequate. Review A1.07-01 through A1.07-04 and the draft engagement letter. Document the conclusion. If a limitation would preclude an audit opinion, document why the engagement is nonetheless accepted (if at all) or declined.

Identify the financial statements and period/year-end to be audited. Review, as applicable, prior-year financial statements, the draft engagement letter, and management inquiry. Document the statements and period. Record any disagreement between the client's request and the draft terms.

Identify the applicable financial reporting framework (for example, U.S. GAAP) and whether it is acceptable in the circumstances. Review prior-year financial statements, the draft engagement letter, and management's explanation of why the framework is appropriate for the entity and users. Document the framework. If the framework is unclear or unacceptable, document the exception.

Identify that the audit is to be conducted under GAAS and the expected form of the auditor's report, including any special reporting needs that actually apply (restricted use, contractual reports, or additional statutory reports only if they apply). Review the draft engagement letter, prior reports, and user/lender/regulator correspondence, as applicable. Do not assume Government Auditing Standards or other extra requirements unless they apply. Document the expected report and any mismatch with client expectations as an exception.

Identify expected users, significant locations or components, and expected timing of fieldwork and reporting, to the extent relevant. Inquire of management and review, as applicable, prior statements, grantor/lender correspondence, and calendars. Document users, locations/components in scope, and dates. Record any component or deadline that the firm cannot serve as an exception.

Confirm that written engagement terms will reflect agreed responsibilities, access, framework, and report, consistent with AU-C 210. Review the draft or signed engagement letter against A1.07 and A1.08. Document that terms will be issued or updated before work proceeds beyond acceptance. Do not document terms as “agreed” unless they have been discussed and are intended to be included in the written agreement. Note unresolved disagreements.

Inquire about litigation, regulatory matters, and going-concern indicators relevant to acceptance. Review, as applicable, prior financial statements (losses, going-concern disclosures, contingencies), legal or regulatory correspondence if provided, and management inquiry. Document matters identified or that inquiry and records reviewed did not identify such matters. Follow up on significant items; do not treat rumor as fact. Record information that does not agree with management representations as an exception.

Inquire about suspected fraud, illegal acts, related-party complexity, and unusual transactions. Review, as applicable, related-party notes, unusual year-end items in prior statements, and management/governance inquiry. Document information obtained and any concern that affects acceptance. This step does not complete fraud, illegal-act, or related-party audit procedures. Record unresolved concerns as exceptions.

Consider financial distress, management restrictions, aggressive accounting, significant estimates, complex transactions, high-risk industry conditions, and prior audit problems. Review prior financial statements, prior reports/management letters, and inquiry, as applicable. Document circumstances identified and whether the firm can respond with staffing, specialists, or consultation—or whether risk of association is unacceptable. Record unacceptable or unresolved circumstances as exceptions.

Consult within the firm on significant special-acceptance matters before acceptance when warranted. Document the consultation, persons involved, and conclusion. If consultation is not needed, document that no matter rose to that level based on A1.09-01 through A1.09-03. Record significant matters left unconsulted when consultation was warranted as exceptions.

Document special circumstances and their effect on acceptance, including how significant matters were addressed or why they remain unresolved. Professional skepticism is required; not every issue is a reason to decline. Record unresolved matters as exceptions until resolved. Do not treat the presence of a nonprofit, regulated, or complex entity as automatically unacceptable.

Review the results of A1.01–A1.09, distinguishing procedures marked not applicable (with reasons) from procedures not performed. Inspect the checklist status and notes for each procedure. Document incomplete procedures. Do not conclude acceptance while required procedures are not performed without a documented basis.

Identify unresolved issues that would preclude performing an audit in accordance with GAAS, including unmet independence/ethics requirements or inability to obtain sufficient appropriate audit evidence. Review exception items and open notes in A1.01–A1.09. Document unresolved issues. If none, document that review.

Consider independence, management integrity, competence and resources, predecessor matters, cooperation and access, scope and reporting terms, and special risks together. Review the conclusions recorded in A1.02–A1.09. Document any area that remains unsatisfactory. Do not substitute this overview for the underlying procedures. Record unsatisfactory areas as exceptions.

Document significant matters and how they were resolved, including consultations, safeguards, staffing, or revised terms. Review consultation notes and exception resolutions. If a significant matter is unresolved, document it and do not mark this item completed.

Record the decision to Accept engagement, Decline engagement, or Continue existing client, with the basis, significant matters considered, and who made the decision (engagement partner, or as required by firm policy). Confirm that written engagement terms will be issued or updated if accepted or continued. Incomplete procedures should not be cured by a boilerplate conclusion. Checking this item is not itself the acceptance decision.