ISA 210 – Recurring Audits:
On recurring audits, the auditor shall assess whether circumstances require the terms of the audit engagement to be revised and whether there is a need to remind the entity of the existing terms of the audit engagement.
ISA 210 – Acceptance of a Change in the Terms of the Audit Engagement:
- The auditor shall not agree to a change in the terms of the audit engagement where there is no reasonable justification for doing so.
- If, prior to completing the audit engagement, the auditor is requested to change the audit engagement to an engagement that conveys a lower level of assurance, the auditor shall determine whether there is reasonable justification for doing so.
- If the terms of the audit engagement are changed, the auditor and management shall agree on and record the new terms of the engagement in an engagement letter or other suitable form of written agreement.
- If the auditor is unable to agree to a change of the terms of the audit engagement and is not permitted by management to continue the original audit engagement, the auditor shall:
a. Withdraw from the audit engagement where possible under applicable law or regulation; and
b. Determine whether there is any obligation, either contractual or otherwise, to report the circumstances to other parties, such as those charged with governance, owners or regulators.
ISA 210 – Additional Considerations in Engagement Acceptance:
Financial Reporting Standards Supplemented by Law or Regulation
- If financial reporting standards established by an authorized or recognized standards setting organization are supplemented by law or regulation, the auditor shall determine whether there are any conflicts between the financial reporting standards and the additional requirements. If such conflicts exist, the auditor shall discuss with management the nature of the additional requirements and shall agree whether:
a. The additional requirements can be met through additional disclosures in the financial statements; or
b. The description of the applicable financial reporting framework in the financial statements can be amended accordingly.
If neither of the above actions is possible, the auditor shall determine whether it will be
necessary to modify the auditor’s opinion in accordance with ISA 705.
Financial Reporting Framework Prescribed by Law or Regulation—Other Matters Affecting Acceptance:
- If the auditor has determined that the financial reporting framework prescribed by law or regulation would be unacceptable but for the fact that it is prescribed by law or regulation, the auditor shall accept the audit engagement only if the following conditions are present:
a. Management agrees to provide additional disclosures in the financial statements required to avoid the financial statements being misleading; and
b. It is recognized in the terms of the audit engagement that:
i. The auditor’s report on the financial statements will incorporate an Emphasis of Matter paragraph, drawing users’ attention to the additional disclosures, in accordance with ISA 706; and
ii. Unless the auditor is required by law or regulation to express the auditor’s opinion on the financial statements by using the phrases “present fairly, in all material respects,” or “give a true and fair view” in accordance with the applicable financial reporting framework, the auditor’s opinion on the financial statements will not include such phrases.
- If the conditions outlined in paragraph 19 are not present and the auditor is required by law or regulation to undertake the audit engagement, the auditor shall:
a. Evaluate the effect of the misleading nature of the financial statements on the
auditor’s report; and
b. Include appropriate reference to this matter in the terms of the audit engagement.
Auditor’s Report Prescribed by Law or Regulation:
- In some cases, law or regulation of the relevant jurisdiction prescribes the layout or wording of the auditor’s report in a form or in terms that are significantly different from the requirements of ISAs. In these circumstances, the auditor shall evaluate:
a. Whether users might misunderstand the assurance obtained from the audit of the financial statements and, if so,
b. Whether additional explanation in the auditor’s report can mitigate possible misunderstanding.
- If the auditor concludes that additional explanation in the auditor’s report cannot mitigate possible misunderstanding, the auditor shall not accept the audit engagement, unless required by law or regulation to do so. An audit conducted in accordance with such law or regulation does not comply with ISAs. Accordingly, the auditor shall not include any reference within the auditor’s report to the audit having been conducted in accordance with ISAs.
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