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CMA Intermediate · Corporate Accounting and Auditing · Audit Engagement, Audit Program, Audit Documentation and Audit Evidence

A CMA firm is drafting an engagement letter for a manufacturing company. Which of the following statements best reflects the guidance in SA 210 on the form and content of the letter?

The letter may state that, because of the inherent limitations of an audit and of internal control, there is an unavoidable risk that some material misstatements may not be detected even if the audit is properly planned and performed under the SAs.

  1. AThe form and content must be identical for every entity
  2. BThe letter may refer to the unavoidable risk that some material misstatements may not be detected despite a properly planned and performed auditCorrect
  3. CThe letter must not mention fees or billing arrangements
  4. DThe letter must not ask management to acknowledge receipt

Explanation

SA 210 says the form and content may vary for each entity, and the letter may refer to inherent limitations of an audit and internal control creating an unavoidable risk that some material misstatements may go undetected. It may also mention fee basis and billing, and may request management to acknowledge receipt and agree to the terms. Hence the other options are wrong.

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