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

Midway through the audit of Kisan Agro Ltd, the management and the auditor, Desai & Co., agree to change the terms of the engagement. How should the change be handled under SA 210?

The auditor and management must agree on the new terms and record them in an engagement letter or other suitable form of written agreement. An oral understanding or a unilateral note by the auditor is not enough under SA 210, regardless of whether fees change.

  1. AThe auditor and management must agree on and record the new terms in an engagement letter or other suitable form of written agreementCorrect
  2. BAn oral understanding is sufficient since the original letter already exists
  3. COnly the auditor needs to record the change in working papers
  4. DThe change is recorded only if it increases fees

Explanation

Paragraph 16 requires that if the terms of the audit engagement are changed, the auditor and management agree on and record the new terms in an engagement letter or other suitable form of written agreement. Oral agreement or a unilateral file note does not satisfy this, and the requirement is not limited to fee changes.

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