Page 470 - CA Final PARAM Digital Book.

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 auditor has determined that the financial reporting framework to be applied in the
preparation of the financial statements is unacceptable; or
• If the agreement as discussed above has not been obtained.

➢ 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 the terms of a 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 such a limited engagement as an audit engagement, unless required by law or regulation to
do so.

➢ Conclusion:-
In the instant case, Mr. Ram should not accept the appointment as statutory auditor of XYZ Private
Limited due to limitation imposed on his scope of work.

SA230

QNO Factors affecting Form Content & Extent Old Course - (N15E, M17M, M20R)
6.000 TITANIUM CNO - SA230.040 New Course- (M20R)

Mr. A, a practising Chartered Accountant, has been appointed as an auditor of True Pvt. Ltd. What factors
would influence the amount of working papers required to be maintained for the purpose of his
audit?

Answer Part I -- Relevant Standards & Laws
▪ SA 230, Audit Documentation

Part II -- Requirements of Relevant Standards & Laws
➢ Factors affecting Form Content & Extent
• It is in flow of audit process: - .As auditor reaches premises of client he will know
size & complexity→ Risk Assessment→ Audit Procedures→ Audit Methodology→
Significance of Audit Evidence→ Exceptions→ Basis of Conclusion
The form, content and extent of audit documentation depend on factors such as:

• The size and complexity of the entity. (↑Size ↑Extent, ↑Complexity ↑ Extent)
• The identified risks of material misstatement. (↑Risk ↑Extent)
• The nature of the audit procedures to be performed. (Test of controls→Flow Charts
Content / Analytical Procedures→ Graphs & Ratios)
• The audit methodology and tools used. (Manual Inspection of Records→Physical
Form / CAAT→Electronic Form)
• The significance of the audit evidence obtained. (High Court Order of
Amalgamation→Photocopy Document Form / Regular Purchase Order→Inspection
+ recorded PO number)
• The nature and extent of exceptions identified. (fraud + material→Extent ↑ / error
+ material→Extent ↓)

The need to document a conclusion or the basis for a conclusion not readily determinable from the
documentation of the work performed or audit evidence obtained. (Complex working→Detailed
Calculation will be covered in content / Simple→ Only references will be given in content)

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