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CMA Intermediate · Corporate Accounting and Auditing · Audit Engagement, Audit Program, Audit Documentation and Audit Evidence

Which of the following may an audit engagement letter refer to, according to SA 210?

An engagement letter may refer to management's agreement to make draft financial statements and accompanying information available in time for the auditor to finish within the proposed timetable. It cannot promise detection of all misstatements, because inherent limitations leave an unavoidable risk that some may go undetected.

  1. AThe agreement of management to make available draft financial statements in time to complete the audit per the proposed timetableCorrect
  2. BA guarantee that all material misstatements will be detected
  3. CA waiver of the auditor's duty to communicate in the auditor's report
  4. DThe auditor's right to alter the financial statements directly

Explanation

SA 210 lists, among possible letter contents, management's agreement to provide draft financial statements in time for the proposed timetable. It also mentions the inherent limitation that some material misstatements may go undetected, so a guarantee of detection is contrary to it. The other options are not listed.

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