ISA 210 - Agreeing the terms of audit engagements

ISA 210 - Agreeing the terms of audit engagements

1. Objective of ISA 210

   • 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
       • The auditor shall determine whether the financial reporting framework to be applied in the preparation of the financial statements is acceptable
         • Ensure that management understand their RESPONSIBILITIES
           • Preparation of the financial statements in accordance with the applicable financial reporting framework
           • Enable the preparation of financial statements that are free from MATERIAL MISSTATEMENT whether due to FRAUD or ERROR
           • Provide the auditor with:-
             • Access to all information
               • Additional information that the auditor may request
                 • Unrestricted access to persons within the entity
     • Confirming that there is a COMMON UNDERSTANDING between the auditor & management of the terms of the audit engagement

2. Engagement Letter

   • Contractual form
   • Matters which SHALL be clarified in the engagement letter
     • Objective & scope of the audit
     • Auditor's responsibilities
     • Managements responsibilities
     • Identification of applicable financial reporting framework
     • Expected form & contents of reports to be issued by the auditor & statement that there may be circumstances when a report may differ from this
   • Recurring audits
     • Not required to send a new letter for each audit, but must ensure that the client still understands existing terms

3. Other changes in agreement terms

   • The auditor shall not agree to a change in the terms of the audit engagement where there is no reasonable justification for doing so
   • If there is reasonable justification for changing the terms, the new terms should be agreed upon & recorded
   • If the auditor is not able to agree to new terms
     • Withdraw
     • Consider if it is necessary to report the circumstances to other parties such as the shareholders or regulators