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CA Intermediate · Auditing and Ethics · Audit Strategy, Audit Planning and Audit Programme

CA Meera is invited to be the auditor of Sundar Auto Ltd. for the next year. The previous auditor's term is ending. Before accepting the audit and planning it, which step is most appropriate under the Code of Ethics and SA 300 for initial engagements?

The incoming auditor should communicate with the previous auditor before accepting the engagement, as the Code of Ethics requires, and plan procedures on opening balances for an initial engagement. Management's objection cannot waive this, and opening balances cannot be relied on without audit procedures.

  1. AAccept the appointment first and then ask the previous auditor for working papers
  2. BCommunicate with the previous auditor as required by the Code of Ethics and the Chartered Accountants Act, and carry out procedures on opening balances as part of planningCorrect
  3. CSkip communication with the previous auditor if management objects
  4. DRely entirely on opening balances without any procedures because they were audited earlier

Explanation

The Code of Ethics (Chartered Accountants Act, Schedule requirements) requires the incoming auditor to communicate with the previous auditor before accepting the engagement. SA 300 requires planning activities for an initial engagement, including procedures on opening balances (SA 510). Management's objection does not remove the requirement, and opening balances cannot be accepted without procedures.

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