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

M/s Rao & Co., Chartered Accountants, are appointed to audit Veda Textiles Ltd. Before accepting, the firm wants to know which standard requires the auditor to agree the terms of the engagement with management or those charged with governance and record them in writing. Which Standard on Auditing deals with this?

SA 210, Agreeing the Terms of Audit Engagements, is the correct standard. It requires the auditor to agree the engagement terms with management or those charged with governance and record them in an engagement letter or other written form, whereas the other standards deal with quality control, documentation and communication.

  1. ASA 210, Agreeing the Terms of Audit EngagementsCorrect
  2. BSA 220, Quality Control for an Audit of Financial Statements
  3. CSA 230, Audit Documentation
  4. DSA 260, Communication with Those Charged with Governance

Explanation

SA 210 requires the auditor to agree the terms of the audit engagement with management or those charged with governance and record them in an audit engagement letter or other suitable written form. SA 220 deals with quality control, SA 230 with documentation and SA 260 with communication of audit matters, so these are not the standard for engagement terms.

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