During the planning phase of an audit of a nonissuer, the auditor is establishing an understanding with the client regarding the services to be performed. The client requests that the engagement be changed from an audit to a review due to a misunderstanding of the cost involved. Under AU-C 210, which of the following is the auditor's BEST course of action?

Answer options:

Refuse the request because the engagement letter for the audit has already been signed.

Agree to the change automatically since the client determines the scope of services.

Evaluate whether there is reasonable justification for the change and, if so, agree to the change and issue a review report.

Agree to the change but include a reference to the original audit engagement in the review report.

How to approach this question

Recall the requirements for changing engagement terms. Key factor: 'Reasonable Justification'.

Full Answer

C.Evaluate whether there is reasonable justification for the change and, if so, agree to the change and issue a review report.✓ Correct

According to AU-C 210, the auditor should consider the justification for the request. A misunderstanding as to the nature of the service or a change in requirements (e.g., bank no longer requires an audit) is considered reasonable justification. If justified, the auditor issues the report for the new service without reference to the original engagement.

Common mistakes

Thinking the auditor must always refuse, or that the report must mention the original audit scope.

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