MNB Bank Ltd. is undergoing its statutory branch audit. During planning stage, engagement partner convened a meeting with audit team and a valuation…

Engagement Team Discussions: All personnel performing an engagement, including any experts contracted by the firm in connection with that engagement are known to be the “Engagement Team". The engagement team should hold discussions to gain better understanding of the bank and its environment, including internal control, and also to assess the potential for material misstatements of the financial statements. All these discussions should be appropriately documented for future reference. The discussion between the members of the engagement team and the audit engagement partner should be done on the susceptibility of the bank’s branch financial statements to material misstatements. These discussions are ordinarily done at the planning stage of an audit. The engagement team discussion ordinarily includes a discussion of the following matters: (i) Errors that may be more likely to occur; (ii) Errors which have been identified in prior years; (iii) Method by which fraud might be perpetrated by bank personnel or others within particular account balances and/or disclosures; (iv) Audit responses to Engagement Risk, Pervasive Risks, and Specific Risks; (v) Need to maintain professional skepticism throughout the audit engagement; (vi) Need to alert for information or other conditions that indicates that a material misstatement may have occurred (e.g., the bank’s application of accounting policies in the given facts and circumstances). Advantages of such a discussion :- (i) Specific emphasis should be provided to the susceptibility of the bank’s financial statements to material misstatement due to fraud, that enables the engagement team to consider an appropriate response to fraud risks, including those related to engagement risk, pervasive risks, and specific risks. (ii) It further enables the audit engagement partner to delegate the work to the experienced engagement team members and to determine the procedures to be followed when fraud is identified. (iii) Further, audit engagement partner may review the need to involve specialists to address the issues relating to fraud.