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

Mallory & Co audits Kestrel Foods plc and has issued an engagement letter for the current year. Nothing has changed in Kestrel's circumstances, the legal framework or the audit scope. The engagement partner asks whether a new engagement letter is required each year. What does ISA 210 indicate?

On recurring audits the auditor may decide not to issue a new engagement letter every period. However, the auditor should consider whether circumstances, such as management changes, altered terms or legal changes, mean the terms should be revised or the entity reminded of the existing terms.

  1. AA new letter must be signed each year in every case
  2. BThe auditor may decide not to send a new letter each period, but should consider whether circumstances require the terms to be revised or the entity reminded of themCorrect
  3. CNo further letter is ever needed after the first year under any circumstances
  4. DA new letter is needed only if the audit fee changes

Explanation

ISA 210 states that on recurring audits the auditor may decide not to send a new letter each period. Circumstances such as indications that the entity misunderstands the objective and scope, changed terms, a change in senior management, or a change in legal requirements may make revised terms or a reminder appropriate. Absolute rules in either direction are therefore wrong.

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