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CA Intermediate · Auditing and Ethics · Ethics and Terms of Audit Engagements

CA Ritu is the statutory auditor of Bharat Components Ltd. Midway through the audit, the management requests her to change the engagement to a review engagement that provides lower assurance, saying the audit is too costly. There is no reasonable justification other than cost convenience. What should she do under SA 210?

CA Ritu should not agree to the change, because the only reason is cost convenience, which is not a reasonable justification for reducing an audit to a lower assurance engagement under SA 210. An indemnity or relabelling the work does not cure the lack of justification.

  1. AAgree to the change and issue a review report with the same date as the audit report
  2. BAgree to the change but continue to describe the work as an audit
  3. CNot agree to the change, since there is no reasonable justification for itCorrect
  4. DAgree to the change only if the Board gives a written indemnity

Explanation

Under SA 210, an auditor who is asked to change an audit engagement to one with a lower level of assurance must consider the appropriateness of the reason. A request based only on cost or convenience is not a reasonable justification, so the auditor should not agree to it. Calling the work an audit after reducing assurance would be misleading, and an indemnity does not create justification.

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