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

Mahesh & Co. is the new auditor of Jaipur Gems Ltd. The previous auditor completed the prior year's audit. Under SA 300, which of the following is an activity the auditor should undertake at the start of the current audit as part of preliminary engagement activities?

At the start of the audit, the auditor should perform continuance procedures for the client relationship, evaluate compliance with ethical requirements including independence, and establish the terms of engagement, as SA 300 requires. Report issuance, file assembly and representation letters belong to the completion stage.

  1. APerform procedures on the continuance of the client relationship and evaluate compliance with ethical requirements including independenceCorrect
  2. BIssue the audit report on the current year's financial statements to the management
  3. CFinalise the audit working papers and assemble the audit file
  4. DObtain the written representation letter on the completeness of related party transactions

Explanation

SA 300 requires the auditor to undertake preliminary engagement activities at the beginning of the current audit: performing procedures regarding continuance of the client relationship and the specific audit engagement, evaluating compliance with ethical requirements including independence, and establishing an understanding of the terms of engagement. Issuing the report, assembling the file and obtaining representations all happen at the end of the audit.

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