Page 84 - AAA Integrated Workbook STUDENT S18-J19

Chapter 6 4

5.2 Preconditions for an audit

Auditors should only accept a new audit engagement, or continue an existing audit
engagement if the 'preconditions for an audit' required by ISA 210 Agreeing the
Terms of Audit Engagements are present.

ISA 210 requires the auditor to:

 Determine whether the financial reporting framework to be applied in the
preparation of the financial statements is acceptable.

 Obtain the agreement of management that it acknowledges and understands its
responsibilities for the following:

– Preparing the financial statements in accordance with the applicable
financial reporting framework.

– Internal control necessary for the preparation of the financial statements to
be free from material misstatement.

– Providing the auditor with access to information relevant for the audit and
access to staff within the entity.

If the preconditions for an audit are not present, the auditor should discuss the matter
with management, and should not accept the engagement unless required to do so
by law or regulation.

5.3 Continuing an engagement

Once the audit is complete, the audit firm must revisit the acceptance considerations
to ensure it is appropriate to continue with the engagement for the following year.

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