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

The management of Orion Pharma Ltd proposes the terms of an audit engagement in which the auditor will not be allowed to attend the physical verification of inventory or access bank confirmations. The auditor believes this limitation will force a disclaimer of opinion on the financial statements. No law requires the auditor to accept such an engagement. What should the auditor do?

The auditor should not accept the engagement as an audit. SA 210 says that where management imposes a scope limitation the auditor believes will result in a disclaimer of opinion, the auditor shall not accept it as an audit engagement unless law or regulation requires it.

  1. ANot accept the engagement as an audit engagementCorrect
  2. BAccept the engagement and issue a disclaimer at the end
  3. CAccept it after getting a higher fee
  4. DAccept it but describe it as a review engagement without further consideration

Explanation

Under SA 210, if management imposes a scope limitation in the proposed terms that the auditor believes will result in a disclaimer of opinion, the auditor shall not accept the engagement as an audit, unless law or regulation requires it. Fee level or relabelling does not cure the limitation.

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