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

CA Tarun is the continuing auditor of Bhagat Steels Ltd. For the current year he plans preliminary engagement activities. Which set of activities is required to be performed at the start of the current audit under SA 300?

At the start of the audit the auditor must carry out preliminary engagement activities: continuance procedures, evaluation of ethical requirements including independence, and establishing an understanding of the terms of engagement. Representation letters and draft reports come at completion, not at planning.

  1. AOnly drawing up the audit programme for each account area
  2. BPerforming procedures on continuance of client relationship and specific engagement, evaluating compliance with ethical requirements including independence, and establishing an understanding of the terms of engagementCorrect
  3. CObtaining the management representation letter and issuing the draft audit report
  4. DSelecting the final sample for substantive testing and fixing the performance materiality for the next year

Explanation

SA 300 requires preliminary engagement activities: procedures regarding continuance of the relationship and the specific engagement, evaluation of ethical compliance including independence, and establishing an understanding of the engagement terms. The representation letter and draft report come at completion; sample selection is a later step.

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