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CMA Intermediate · Corporate Accounting and Auditing · Audit Engagement, Audit Program, Audit Documentation and Audit Evidence

For Sundaram Textiles Ltd, the auditor is unable to obtain sufficient appropriate audit evidence on receivables. Management asks to change the engagement to a review engagement to avoid a qualified opinion or disclaimer. Under SA 210, how is this request viewed?

The request is not considered reasonable. SA 210 says a change in engagement terms is not reasonable when it relates to incorrect, incomplete or unsatisfactory information, and gives this very example of switching to a review engagement to avoid a qualified opinion or disclaimer over receivables evidence.

  1. AReasonable, because the client may choose the level of assurance at any time
  2. BReasonable, provided the fee is renegotiated
  3. CNot considered reasonable, as the change appears to relate to unsatisfactory informationCorrect
  4. DMandatory to accept, since management is responsible for the financial statements

Explanation

SA 210 notes that a change may not be reasonable if it relates to information that is incorrect, incomplete or otherwise unsatisfactory. Its example is exactly this: unable to get evidence on receivables and the entity asks for a review engagement to avoid a modified opinion. Fee renegotiation does not make the change justified.

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