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CA Intermediate · Auditing and Ethics · Audit Strategy, Audit Planning and Audit Programme

Vikram, the auditor of Deccan Steels Ltd., is a continuing auditor. For the current year he plans to use the prior year's working papers to support planning. Which statement correctly reflects the guidance on preliminary engagement activities and planning?

Even for a continuing audit, the auditor should perform preliminary engagement activities at the start of the current audit, such as evaluating compliance with ethical requirements, including independence, and confirming the engagement terms. They are not limited to first-year audits or postponed to the end.

  1. APreliminary engagement activities such as evaluating compliance with ethical requirements and reviewing the terms of engagement should be performed at the start of the current auditCorrect
  2. BPreliminary activities are needed only for a first-year audit
  3. CEthical compliance, including independence, needs to be evaluated only at the end of the audit
  4. DPrior year working papers cannot be considered at all in planning

Explanation

SA 300 requires the auditor to undertake preliminary engagement activities at the beginning of the current audit, including those under SA 220 on ethics and independence and SA 210 on terms of engagement, even for recurring audits. Prior year information is useful for planning, so option D is wrong, and independence cannot wait until the end.

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