Skip to content

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

CA Iyer is drafting an engagement letter for Zenith Pharma Ltd, a listed company. He wants to add a statement that, owing to inherent limitations of an audit and of internal control, some material misstatements may remain undetected even though the audit is properly planned and performed under SAs. How does SA 210 treat such a statement?

SA 210 lists the inherent limitations of an audit and internal control, with the unavoidable risk of undetected material misstatement, as a matter the engagement letter may refer to. It is optional, not mandatory, and not prohibited.

  1. AIt is a mandatory term under the paragraph listing required matters
  2. BIt is prohibited because it limits the auditor's responsibility
  3. CIt is an example of a matter to which the engagement letter may make referenceCorrect
  4. DIt may be included only if the company's articles permit

Explanation

The required list covers objective and scope, responsibilities, framework and report form. The inherent limitations statement appears among the examples the letter may refer to, so it is permitted but not mandatory, and it is not prohibited.

Did you get it right without looking?

One question tells you little. A timed set on Audit Engagement shows your real accuracy, how long you take and where you lose marks.

Practise Audit EngagementFree diagnostic mock

More Audit Engagement questions