Perhaps the "7" refers to the requirement for audit partners to rotate every 7 years? If the prior audit partner audited the company's books for more than seven years, this would also be considered an engagement issue, since the partner may no longer be considered to have a sufficiently arm's length/objective relationship with the client (i.e. they are too familiar with the client). In general, engagement issues are factors that may affect an auditor's ability to perform an objective and competent audit. All of the above (scope limitation, independence, timeline, and prior engagements greater than 7 years in length) would affect the auditor's ability to provide a competent audit. Note that the prospective engagement partner should also not be taking on an audit engagement for more than seven years - this is something to look for in any case scenario.
Hi Wilson, Thank you for your post.
Engagement issues are things for an accountant/accounting firm to consider prior to undertaking an audit engagement with a client.
While I'm not familiar with the "7", I believe SIT stands for Scope Limitation, Independence and Timeline. These are all issues to consider prior to accepting an audit engagement.
Scope limitation: An auditor is unable to obtain sufficient evidence over prior year’s financials.
Independence: There may not be a sufficiently arm's length relationship with the prior engagement partner. For example - perhaps an engagement partner used to be on the company's Board of Directors.
Timeline: Is it possible to complete the audit within the desired time frame?
These are all issue to consider prior to accepting an engagement. Hopefully someone else can clarify the "7" in SIT-7.
Hope this helps!