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

Mehta & Co., a firm of auditors, is approached by Kaveri Textiles Ltd. to audit its financial statements for the first time. Under SA 300, which of the following must the auditor do before starting this initial audit?

Before starting an initial audit, the auditor must perform the SA 220 procedures for accepting the client relationship and the specific audit engagement. Acceptance is a preliminary activity completed before significant audit work, not after testing or after management reviews drafts.

  1. APerform the procedures required by SA 220 regarding acceptance of the client relationship and the specific audit engagementCorrect
  2. BIssue the audit report in draft form to the management for their approval of the scope
  3. CComplete the substantive testing of opening balances and then decide on acceptance
  4. DWait until the first board meeting after appointment before considering client acceptance

Explanation

SA 300 requires the auditor, prior to starting an initial audit, to perform the SA 220 procedures on acceptance of the client relationship and the specific engagement. Substantive testing and draft reports come after acceptance, so deciding acceptance after testing reverses the required order.

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