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

Meridian Textiles Ltd appoints CA Rao as its auditor. Before starting the audit, Rao wants his engagement letter to satisfy the minimum matters that SA 210 requires to be recorded in the agreed terms. Which of the following is one of those required matters?

Identification of the applicable financial reporting framework is a mandatory term of the engagement letter under SA 210. Fees, audit team composition and use of internal auditors are optional additional points that the letter may mention but need not include.

  1. AThe basis on which fees are computed and billing arrangements
  2. BIdentification of the applicable financial reporting framework for preparing the financial statementsCorrect
  3. CThe composition of the audit team
  4. DArrangements for involvement of internal auditors of the entity

Explanation

The required contents are: objective and scope of the audit, responsibilities of the auditor, responsibilities of management, identification of the applicable financial reporting framework, and the expected form and content of reports. Fees, team composition and internal auditor involvement are only matters the letter may refer to, not mandatory items.

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