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CS Professional · Compliance Management, Audit and Due Diligence · Audit Engagement

Before accepting appointment as auditor of Sundaram Foods Ltd, CA Neha Rao asks why preliminary engagement activities are performed at all. Which outcome is, per SA 300, enabled by performing them?

Preliminary engagement activities enable the auditor to maintain necessary independence and ability to perform the engagement, avoid management integrity issues that could affect willingness to continue, and ensure no misunderstanding with the client about the engagement terms, as SA 300 explains.

  1. AThe auditor is guaranteed to detect all frauds in the entity
  2. BThe auditor maintains necessary independence and ability to perform the engagement, with no management integrity issues affecting willingness to continue and no misunderstanding of termsCorrect
  3. CThe audit fee is fixed by the entity's board without negotiation
  4. DThe auditor is relieved from agreeing the terms of engagement in writing

Explanation

SA 300 states that preliminary activities let the auditor plan an engagement where independence and ability are maintained, there are no management integrity issues affecting continuance, and there is no misunderstanding about terms. The other options claim outcomes not in the text.

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