AA Chapter 24 Questions
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Question 2. The letter of engagement is on the permanent file (at least this is the correct answer). Since the engagement letter is signed every year for each annual audit appointment, how can it be that is included in the Permanent file. Shouldn’t it be in the current?
ISA 210 does not require a letter to be signed each year (such “rubber stamping” might even devalue it). As indicated by the last point on page 47 of the notes it should be updated for changes – when clearly it would have to be signed.
For recurring audits ISA 210 requires only that the auditor assess whether circumstances require the terms to be revised or if there is a need to remind the client of existing terms. To remind the entity of existing terms does not mean the engagement letter has to be reissued (the reminder could be documented in a separate letter).
So even though for example updating audit fees constitutes changes, because ISA 210 does not requires an engagement letter to be signed every year, as long as the term of the contract are unchanging it is a document included in the permanent audit file?
The engagement letter will describe the basis of the fee – rather than specify a fixed monetary amount. It is quite usual for the actual fee invoiced to be a matter of negotiation because the audit opinion cannot be constrained by a budget. Please use the ASK the Tutor forum for technical queries to ensure they are answered on a timely basis.
Q5. The EQCR can be hot before the audit report is signed, and cold after the audit report. So correct answer should be anytime before and after ? Unless cold review is not considered EQCR
By definition an EQCR must be before auditor’s report is signed – i.e. “hot”.
Sir,
I’m sorry but this is very confusing as the AA study notes speak of the hot and cold EQCR without pointing out that the cold review is no an EQCR.
Many thanks
I will make sure this is spelt out in the next update of the notes.
Should the cold review not be considered in the answer for the question expressed in this way?
You have to quote the Q/specify # to make clear what is your query .