Auditing and EthicsQuestion 5652 of 212
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1. Which of the following would not form part of the explanation given by CA P to Rahul?

Options

AA recent change of senior management
BA significant change in nature or size of the entity's business
CReplacement of CA K by CA P
DA change in legal or regulatory requirements (2 Marks)
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Correct Answer

Option CReplacement of CA K by CA P

All Options:

  • AA recent change of senior management
  • BA significant change in nature or size of the entity's business
  • CReplacement of CA K by CA P
  • DA change in legal or regulatory requirements (2 Marks)

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Detailed Solution & Explanation

Under SA 210, "Agreeing the Terms of Audit Engagements", the auditor is required to assess whether circumstances require the terms of the audit engagement to be revised.
Such circumstances include:
1. A recent change of senior management.
2. A significant change in ownership.
3. A significant change in nature or size of the entity's business.
4. A change in legal or regulatory requirements.
5. A change in the financial reporting framework adopted in the preparation of the financial statements.
The replacement of the predecessor auditor (CA K) by the incoming auditor (CA P) is the reason for establishing the initial engagement, but it does not, in itself, constitute a change in the terms of the ongoing audit engagement requiring a revised engagement letter.
Hence, **Option C** is the correct answer.

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