Skip to content

CA Intermediate · Auditing and Ethics · Ethics and Terms of Audit Engagements

Mehta & Co., Chartered Accountants, are approached by Sunrise Textiles Ltd. to accept the statutory audit. Before accepting the engagement, which of the following should the firm do as per the Code of Ethics and SA 210?

The firm should first communicate in writing with the existing auditor to find out whether there are professional reasons why the appointment should not be accepted. This is a pre-acceptance requirement under the Code of Ethics. It cannot be postponed until after acceptance or until misstatements are found.

  1. ACommunicate with the existing auditor in writing to ascertain whether there are professional reasons why the appointment should not be acceptedCorrect
  2. BAccept the audit and then inform the retiring auditor after signing the engagement letter
  3. CAsk the management to obtain a no-objection certificate from the Registrar of Companies
  4. DBegin audit procedures and communicate with the previous auditor only if material misstatements are found

Explanation

A chartered accountant in practice must, before accepting an audit in place of another auditor, communicate with the existing auditor in writing to know whether there are professional reasons not to accept. Informing the predecessor after acceptance defeats the purpose. No ROC certificate is required, and the communication is not dependent on finding misstatements.

Did you get it right without looking?

One question tells you little. A timed set on Ethics and Terms of Audit Engagements shows your real accuracy, how long you take and where you lose marks.

Practise Ethics and Terms of Audit EngagementsFree diagnostic mock

More Ethics and Terms of Audit Engagements questions