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CS Professional · Compliance Management, Audit and Due Diligence · Audit Engagement

Mehta & Associates, a firm of chartered accountants, is approached to audit Kavya Textiles Ltd for the first time. Before starting the initial audit, the firm wants to know which activities it must complete first. Which of the following is required before starting an initial audit under SA 300?

Before starting an initial audit, the auditor must perform the SA 220 procedures on acceptance of the client relationship and the specific audit engagement, and communicate with any predecessor auditor. Later activities such as testing and reporting come only after acceptance has been completed.

  1. APerforming the procedures required by SA 220 on acceptance of the client relationship and the specific audit engagementCorrect
  2. BIssuing the audit report on the opening balances
  3. CFinalising the materiality for the financial statements as a whole
  4. DCompleting the substantive testing of the first quarter transactions

Explanation

SA 300 requires the auditor to perform the SA 220 procedures on acceptance of the client relationship and the specific engagement before starting an initial audit. Reporting, materiality finalisation and substantive testing are later audit activities and do not precede acceptance.

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