Page 344 - CA Inter Audit PARAM

CA Ravi Taori

principle auditor, auditor will have to determine whether it is justified or not).

Justified
• If the auditor concludes that there is reasonable justification to change the
engagement and if the audit work performed complied with the SAs applicable to
the changed engagement, the report issued would be appropriate for the revised
terms of engagement. In order to avoid confusion, the report would not include
reference to-
o the original engagement; or
o any procedures that may have been performed in the original engagement,
except where the engagement is changed to an engagement to undertake
agreed-upon procedures and thus reference to the procedures performed is
a normal part of the report.
(E.g., If it is justified because of lack of time and need of report to be
submitted to investor quickly, we can accept such review assignment, then it
will become purely review assignment and no reference to audit will be
made.)

• If the terms of the audit engagement are changed, the auditor and management
shall agree on and record the new terms of the engagement in an engagement
letter or other suitable form of written agreement.
(E.g., Continuing above example, if these are new branches with low turnover
located far away from offices from principal auditor, then such steps appear
justified as it will save time & cost of both principle auditor & company, in such case
sign revised engagement letter)
Unjustified
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 from the audit engagement where possible under applicable law or
regulation; and
• Determine whether there is any obligation, either contractual or otherwise, to
report the circumstances to other parties, such as those charged with governance,
owners or regulators.
(E.g., But if these branches are big branches of company contributing to 40% of
revenue and complicated matters then it is not justified then we will have to
withdraw from assignments and inform TCWG, CAG if required by law)
Author’s Note
This is a master answer of change in Terms of Engagement. Students are advised to write the appropriate
part of the answer as per the requirements of the question

QNO-- Change in Terms From Audit to Review New Course – (J25M)
210.20 Bhaskar CNO – SA210.110

Deepa Ltd., initially requested an audit engagement for the financial year 2023-2024. However, midway
through the audit process, the management claims that they are unable to provide complete supporting
documentation for a significant portion of their receivables. As a result, the management asks the
auditor to change the audit engagement to a review engagement, arguing that it would prevent the
issuance of a

qualified opinion.

The auditor is now facing challenge in determining whether this change is justified or not. Comment in
accordance with relevant SA.
Answer As per SA 210, “Agreeing the Terms of Audit Engagements”, a request from the entity for the auditor to
change the terms of the audit engagement may result from a change in circumstances affecting the need
for the service, a misunderstanding as to the nature of an audit as originally requested or a restriction on
the scope of the audit engagement, whether imposed by management or caused by other circumstances.

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