The auditor's goal is to accept or continue an audit engagement only after the basis on which it will be performed has been agreed upon, which includes:
(a)
determining whether the preconditions for an audit are present; and
(b)
confirming that the terms of the audit engagement are understood by the
auditor, management, and, where appropriate, those charged with governance.
Management
or those in charge of governance, as applicable, must agree to the parameters
of the audit engagement. The following items must be included in an audit
engagement letter or another suitable form of a written agreement:
(a)
the objective and scope of the financial statement audit;
(b)
the auditor's responsibilities;
(c)
management's responsibilities;
(d)
identification of the applicable financial reporting framework for the
preparation of the financial statements; and
(e)
reference to the expected form and content of an audit report
(f)
a statement that a report's form and substance may deviate from what is expected
in certain instances.
Except
for the fact that such law or regulation applies and management acknowledges
and understands its responsibilities, the auditor does not need to record the
terms of the audit engagement referred to above in a written agreement if the
terms of the audit engagement referred to above are prescribed in sufficient
detail by law or regulation. On recurring audits, the auditor must determine if
the terms of the audit engagement need to be updated and whether the business
needs to be reminded of the existing audit engagement terms.
If
there is no reasonable justification, the auditor will not consent to a change
in the terms of the audit engagement. If the auditor is asked to convert the audit
engagement to one that provides a lower level of assurance before it is
completed, the auditor must consider whether there is a reasonable rationale for
doing so.
If
the audit engagement's conditions change, the auditor and management must agree
on and document the new terms in an engagement letter or other suitable form of a written agreement. If the auditor is unable to agree to a change in the audit
engagement terms and is not permitted by management to continue the original
audit engagement, the auditor shall:
(a) Withdraw from the audit engagement where possible under applicable law or regulation; and
(b) Determine whether there is any contractual or other
obligation to report the circumstances to other parties, such as those charged
with governance, owners, or regulators.
Practice:
It is in both the entity's
and the auditor's best interests to minimize misunderstandings about the audit.
The auditor, thus, should issue an audit engagement letter before the start of
the audit.
Source: https://bit.ly/3nZ6Ur6
