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

Sundaram & Co., a firm of Company Secretaries, is asked to audit the financial statements of Kaveri Textiles Ltd. for a new year. At the start of the engagement, which set of activities must the auditor undertake under SA 300 before other significant audit work begins?

At the start of an engagement the auditor must perform client continuance procedures, evaluate compliance with ethical requirements including independence, and establish an understanding of the engagement terms under SA 210. These initial steps come before other significant audit activities, so that independence and acceptability are settled first.

  1. AFix the audit fee, appoint the audit team and issue the audit report
  2. BPerform client continuance procedures, evaluate compliance with ethical requirements including independence, and establish an understanding of the engagement termsCorrect
  3. CObtain management's representation letter and finalise the audit opinion
  4. DComplete substantive testing of material balances and then review independence

Explanation

SA 300 requires the auditor, at the beginning of the current engagement, to perform procedures on continuance of the client relationship, evaluate compliance with ethical requirements including independence, and establish an understanding of the terms of the engagement under SA 210. Options with the fee, opinion or testing do not match these initial activities, and independence cannot be left until after substantive work.

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