ISA 210 DEALS with the Auditor’s responsibilities in AGREEING the terms of the audit engagement with Management and where appropriate those charged with governance.
Table of Contents
ISA 210 – Introduction
1. Scope of this ISA
It deals with ESTABLISHING certain preconditions for an audit, responsibility for which rests with Management and where appropriate those charged with governance.
2. Effective Date
This ISA is EFFECTIVE for audits of financial statements for periods beginning on or after December 15, 2009.
ISA 210 – Objective
The Objective of the ‘Auditor’ is to ACCEPT or CONTINUE an audit engagement only when the basis upon which it is to be performed has been agreed, through:
- ESTABLISHING whether the preconditions for an audit are present; AND
- CONFIRMING that there is a common understanding between the auditor and Management; and where appropriate those charged with governance of the terms of the audit engagement.
ISA 210 – Definitions
1. Preconditions for an Audit
The use by Management of an ACCEPTABLE ‘Financial Reporting Framework‘ in the preparation of the Financial Statements and the agreement of Management and where appropriate those charged with governance to the PREMISE on which an audit is conducted.
ISA 210 – Requirements
1. Preconditions for an Audit
In order to establish whether the preconditions for an AUDIT are present, the auditor shall:
| (a) DETERMINE whether the ‘Financial Reporting Framework‘ to be applied in the preparation of the financial statements is acceptable; AND |
| (b) OBTAIN the agreement of Management that it acknowledges and understands its responsibility: (i) For the PREPARATION of Financial Statements (ii) For Internal Control (iii) To PROVIDE the auditor with: – Access to all information of which management is aware; – Additional information; AND – Unrestricted access to persons. |
1.1 Limitation on Scope Prior to Audit Engagement Acceptance
If Management or those charged with governance impose a limitation on the scope of the auditor’s work in terms of the proposed audit engagement, such that the auditor believes the limitation will result in the auditor ‘DISCLAIMING an OPINION‘ on the Financial Statements, the auditor shall NOT ACCEPT, unless required by law or regulation to do so.
1.2 Other Factors Affecting Audit Engagement Acceptance
If the preconditions for an audit are not present, the auditor shall DISCUSS the Matter with Management. Unless required by law or regulation to do so, the auditor shall NOT ACCEPT the proposed audit engagement:
- If the Financial Reporting Framework to be applied in the preparation of ‘Financial Statements’ is unacceptable; OR
- If the Agreement Regarding Management responsibility has not been obtained.
2. Agreement on Audit Engagement Terms
The ‘Auditor’ shall AGREE the Terms of the audit engagement with Management or those charged with governance as appropriate.
| The terms shall be RECORDED in an audit engagement letter and shall include: |
|---|
| (a) The objective and scope of the audit; |
| (b) The responsibilities of the auditor; |
| (c) The responsibilities of Management; |
| (d) Identification of applicable financial reporting framework; |
| (e) Reference to the expected form and content of any reports to be issued by the auditor; AND |
| (f) A statement that report May differ from its expected form and content. |
3. Recurring Audits
On ‘Recurring Audits’, the auditor shall ASSESS whether circumstances Require the terms of the audit engagement to be revised, and whether there is a Need to remind the entity of the existing terms of the audit engagement.
4. Acceptance of a Change in the Terms of the Audit Engagement
The auditor shall NOT AGREE to a change unless there is reasonable justification for doing so.
If prior to completing, the auditor is requested to change to such an engagement that conveys a LOWER level of assurance, the auditor shall DETERMINE whether there is reasonable justification for doing so.
If the terms are changed, the auditor and Management shall AGREE on and RECORD the new terms of the engagement in an ‘Engagement Letter‘.
If the auditor is unable to agree to a change of the terms of the audit engagement, and is not permitted by Management to continue the original audit engagement, the auditor shall:
- WITHDRAW where possible under applicable law or regulation; AND
- DETERMINE whether to report the circumstances to other parties such as ‘Those Charged with Governance‘, ‘Owners‘ or ‘Regulators‘.
Synopsis
The International Standard on Auditing ISA 210 ‘Agreeing the Terms of Audit Engagements‘ DEALS with the auditor’s responsibilities in agreeing the terms of the audit engagement with Management and where appropriate those charged with governance.
[200-299] General Principles and Responsibilities
Chartered Accountant – ICAP
Bachelor of Accounting (Honours) – AeU, Malaysia