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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Professional appointments

Harbour & Lane, a firm of auditors, has been asked to audit Tessa Ltd for the first time. The firm has accepted the appointment and the preconditions for an audit appear to be present. According to ISA 210, when should the firm agree the terms of the audit engagement with management or those charged with governance?

The terms should be agreed before the audit begins and recorded in an engagement letter or other suitable written agreement. This avoids misunderstandings about scope and responsibilities. Agreeing them after fieldwork or at report signing would be too late to serve that purpose.

  1. ABefore the audit begins, with the terms recorded in an engagement letter or other suitable written agreementCorrect
  2. BAfter the fieldwork is complete, so that the terms reflect what was actually done
  3. COnly if management specifically asks for written terms
  4. DAt the date the auditor's report is signed, to confirm the opinion given

Explanation

ISA 210 requires the auditor to agree the terms of engagement with management or those charged with governance, and to record them in an engagement letter or other suitable form of written agreement. This is done before the audit starts to avoid misunderstandings. Agreeing terms after fieldwork or on the report date defeats this purpose.

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