If Preconditions Are Not Present

Question 1

Purpose of Precondition
Accepting the audit engagement

Answer 1

Here are the smart notes:

Preconditions for an Audit

• Auditor must discuss with management if preconditions are not present.
• Preconditions are required to comply with ISA 210 (Agreeing the terms of audit engagements).
• Purpose of preconditions:
  
  • Avoid misunderstandings about responsibilities of management and auditor.
  • Ensure auditor can express opinion on financial statements.

Accepting the Audit Engagement

• Auditor shall not accept engagement if:
  
  • Management imposes limitation on scope, preventing auditor from expressing opinion.
  • Financial reporting framework is unacceptable.
  • Management does not agree to responsibilities stated in preconditions (the “premise”).