Agreeing the Terms of the Audit Engagements

Objective of the SA

Confirming that there is common understanding between the auditor and the management or those charged with governance.

The auditor’s responsibilities in agreeing to the terms of the audit engagement with management or those charged with governance.

Applicability

  • Contents of audit engagement letters
    — Limitation on scope prior to audit engagement acceptance
  • Recurring audit
  • Changes in terms of engagement
    If auditor is unable to agree to change
  • Financial reporting framework prescribed by law or regulation-other matters affecting acceptance
Case Study 1:

X, a Chartered Accountant was engaged by PQR & Co. Ltd. for auditing their accounts. He sent his letter of engagement to the Board of Directors, which was accepted by the Company. In the course of audit of the company, the auditor was unable to obtain appropriate sufficient audit evidence regarding receivables. The client requested for a change in the terms of engagement. Offer your comments in this regard.

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