Abstract
Abstract : Following the collapse of audit firms and the attendant reputational damage, the principal objective of the study was to develop an Engagement Risk Management Instrument (ERMI) in the Zimbabwean context. This tool would be used by these firms to assess the engagement risk associated with certain clients. Related literature was reviewed for desk research and structured interviews conducted on Audit Partners and Chief Risk Officers from purposively sampled audit firms in order to determine generic engagement risk factors. The Delphi process was selected as a methodology because it allowed the validation and rating of identified engagement risk factors by a panel of experts, the Audit Partners and Chief Risk Officers, in engagement risk assessment before client acceptance. Data for this study was collected in two phases. The data that was collected from the Delphi process was then analysed using the SPSS software resulting in the identification of eight (8) levels of engagement risk factor importance. The study established that through the desk research thirty-four (34) engagement risk factors were identified. These thirty-four (34) identified engagement risk factors were used to guide the structured interviews as part of data collection in phase 1. The interviews identified six more engagement risk factors while confirming twenty-two and rejecting twelve (12) from the desk research. The total number of engagement risk factors consolidated after phase 1 was forty (40) and these forty (40) engagement risk factors were used to construct the Delphi Questionnaire which was employed to collect data in phase 2. Data analysis from phase 2 yielded eight levels of importance of the forty (40) engagement risk factors and these levels guided the construction of the ERMI. The study recommended the use of the ERMI as a tool for assessment and re-assessment of clients by audit firms. As an assessment tool, the ERMI would be used in the initial assessment of potential clients for client acceptance decision making. As a re-assessment tool, the ERMI would be used for existing clients; those that were already engaged. In this case, re-assessment is a necessary on-going process because some of the engagement risk factors are economy-based and the economy is dynamic. It is therefore necessary to continuously assess the companies to curb potential engagement risks that might ruin the reputation of audit firms.
D.Phil. (Auditing)