- 5 Marks
Question
The objective of the auditor per ISA 210: Agreeing the terms of audit engagements is to accept or continue an audit engagement only when the basis upon which it is to be performed has been agreed. One way to do this is to establish whether the preconditions for an audit are present.
Required:
What are the preconditions to be assessed?
(5 marks)
Answer
The preconditions to be assessed before accepting an audit engagement are:
- Acceptability of the Financial Reporting Framework: Ensure that the financial reporting framework to be used in preparing the financial statements is acceptable and suitable for the entity.
- Management’s Responsibility: Obtain acknowledgment from management that they understand their responsibility for preparing the financial statements in accordance with the applicable financial reporting framework.
- Management’s Responsibility for Internal Controls: Confirm that management acknowledges their responsibility for maintaining effective internal controls to prevent or detect material misstatement of the financial statements.
- Access to Information: Ensure that management provides the auditor with all relevant and requested information and unrestricted access to documents and records necessary for the audit.
- Scope Limitations: Identify any limitations on the scope of the audit that may result in a disclaimer of opinion, and ensure that these limitations are acceptable and do not affect the auditor’s ability to perform the audit effectively.
(1 mark for each precondition – 5 marks total)
- Topic: Regulatory Framework and Audit Responsibilities
- Series: NOV 2020
- Uploader: Dotse