Annual Audit Manual
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3045 Acceptance of a change in the terms of the audit engagement
Apr-2018
In This Section
Overview
This topic explains:
- Justification of a change
- Change to a lower level of assurance
- Recording of changes
- Inability to agree to a change
CAS Requirement
The auditor shall not agree to a change in the terms of the audit engagement where there is no reasonable justification for doing so (CAS 210.14).
CAS Guidance
A request from the entity for the auditor to change the terms of the audit engagement may result from a change in circumstances affecting the need for the service, a misunderstanding as to the nature of an audit as originally requested or a restriction on the scope of the audit engagement, whether imposed by management or caused by other circumstances. The auditor, as required by paragraph 14, considers the justification given for the request, particularly the implications of a restriction on the scope of the audit engagement (CAS 210.A31).
A change in circumstances that affects the entity’s requirements or a misunderstanding concerning the nature of the service originally requested may be considered a reasonable basis for requesting a change in the audit engagement (CAS 210.A32).
In contrast, a change may not be considered reasonable if it appears that the change relates to information that is incorrect, incomplete or otherwise unsatisfactory. An example might be where the auditor is unable to obtain sufficient appropriate audit evidence regarding receivables and the entity asks for the audit engagement to be changed to a review engagement to avoid a qualified opinion or a disclaimer of opinion (CAS 210.A33).
OAG Guidance
Consult in accordance with OAG Audit 3081 if we are unable to agree to a change to the engagement. If we are not permitted to continue the original engagement, withdraw from the engagement and consider the obligation, either contractual or otherwise, to report to other parties, such as the board of directors or shareholders, the circumstances necessitating the withdrawal.
See OAG Audit 3011 for further guidance on withdrawing from an audit engagement.
CAS Requirement
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 (CAS 210.15).
CAS Guidance
Before agreeing to change an audit engagement to a review or a related service, an auditor who was engaged to perform an audit in accordance with CASs may need to assess, in addition to the matters referred to in paragraphs A31-A33, any legal or contractual implications of the change (CAS 210.A34).
If the auditor concludes that there is reasonable justification to change the audit engagement to a review or a related service, the audit work performed to the date of change may be relevant to the changed engagement; however, the work required to be performed and the report to be issued would be those appropriate to the revised engagement. In order to avoid confusing the reader, the report on the related service would not include reference to (CAS 210.A35):
(a) The original audit engagement; or
(b) Any procedures that may have been performed in the original audit engagement, except where the audit engagement is changed to an engagement to undertake agreed-upon procedures and thus reference to the procedures performed is a normal part of the report.
CAS Requirement
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 (CAS 210.16).
CAS Requirement
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 (CAS 210.17):
(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.