Ch # 2.

Obtaining an Engagement Page 151

Chapter # 2 Obtaining an Engagement

ISA- 210

Question # 1 Q.8 Spring 2010

(a) A prestigious company has approached your firm to accept appointment as its external auditor. State the matters
that your firm should consider before accepting the engagement. (04)
(c) Your firm has been the auditor of Mujahid Limited (ML) for many years. Before the commencement of the current
year’s audit ML has requested that some changes be made in the terms of engagement.

Required:
(i) What are the circumstances which may lead to changes in terms of engagement? (03)
(ii) Discuss the important points which should be considered before accepting the changes in the terms of
engagement. (05)

Question # 2 Q.1 Spring 2011

Strawberry Pakistan Limited (SPL) was incorporated on March 1, 2011. The directors of SPL are in the process of
appointing the first statutory auditor of the company. They have requested your firm to submit a proposal for the
statutory audit assignment. A partner of your firm has asked you to draft the proposal after assessing whether the
preconditions for the audit exist.

Required:
Briefly discuss the term ‘preconditions for an audit’.
a) What are the steps that you would perform in order to ensure that preconditions for the audit exist?
b) Discuss whether your firm may or may not accept the assignment if one of the preconditions for the audit is not
present. (10 marks )

Question # 3 Q.9 Autumn 2011

List the circumstances in which it may become necessary to revise the terms of audit engagement for a recurring audit.
(07 marks)

Question # 4 Q.3 Spring 2012

An auditor may agree to a change in the terms of engagement provided there is a reasonable justification for doing so.

Required:
a) List the circumstances in which the management may request the auditor to change the terms of an audit
engagement.
b) What factors should be considered by the auditor before accepting a change in the terms of the engagement?
c) List the steps that the auditor should consider, if he is unable to agree to a change in the terms of engagement. (09
marks)

Question # 5 Q.9 Autumn 2012

List the important matters that are required to be included in an audit engagement letter. (06)

Question # 6 Q1 (b) Autumn 2013

Briefly describe the steps that an auditor should take in order to establish whether preconditions of an audit are
present. (06)
Ch # 2. Obtaining an Engagement Page 152

Question # 7 Q.1 Autumn 2014

Khanewal Limited (KL) has requested your firm to submit engagement letter for KL’s statutory audit. The engagement
partner has asked you to establish whether preconditions for the audit of KL are present.

Required:
What matters would you consider in order to ensure that preconditions for the audit exist? (05)

Question # 8 Q.1(b) Spring 2015

The audit engagement letter specifies objective and scope of audit, responsibilities of auditor and management,
applicable financial reporting framework and form and contents of audit report. State any four additional matters that
may be included in the engagement letter. (04)

Question # 9 Q.2 Autumn 2015

Your firm has been re-appointed as the auditor of Elegant Limited (EL) for the year ended 30 June 2015. The firm has
been the auditor of EL for the last five years.

Required:
(a) How would you assess whether it is necessary to send an audit engagement letter to EL for the year ended 30
June 2015? (5)
(b) State how would you proceed If EL requests your firm to change certain terms of engagement.
(4)

Question # 10 Q 5a Autumn 2016

In relation to the audit report on financial statements and the contents thereof (under revised/new ISAs), discuss the
appropriateness or otherwise of the following statements:

The management is only responsible for preparation of financial statements in accordance with the financial reporting
framework and for such internal controls as management determines are necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error. (03)

Question # 11 Q.6c Spring 2017

Discuss the course of action which may be adopted by the auditor if pre-conditions of audit are not present. (4)

Question # 12 Q.6a Spring 2017

List any four situations that may require revision in the terms of audit engagement letter. (4)

Question # 13 Q.1(b) Spring 2018

State the matters which an auditor should consider to establish whether the pre-conditions for an audit are present.
(05)

Question # 14 Q.6(a) Spring 2019

You are the audit manager in a firm of chartered accountants. Your firm has been appointed as the auditor of a listed
company, Rustam Raees Limited (RRL) for the year ending 31 December 2019. RRL has been publishing their annual
financial statements within one month of the year end and have set strict deadlines for the completion of audit.
Further, this year, RRL has changed its accounting policy relating to property, plant and equipment, from historical
cost to revaluation model.
Required:
List the matters (related to the given scenario only) which you would like to include in the engagement letter, along
with their justification. (04)
Ch # 2. Obtaining an Engagement Page 153

Question # 15 Q.9(b) Autumn 2021

Discuss the auditor’s course of action when a client requests to change the existing terms of the audit engagement.
(03)

Question # 16 Q.8(b) Autumn 2023

In certain circumstances, an entity may ask the auditor to change the terms of the audit engagement. What should
the auditor do in such a situation? (03)

ISA- 220

Question # 1 Q.8(c) Spring 2022

State any five matters that need to be considered by engagement quality control partner while performing objective
evaluation of audit of a listed company. (05)

Code of Ethics

Question # 1 Q.2(b) Autumn 2014

Your firm is the auditor of ABD Limited (ABDL). After the acquisition of majority shareholding in HG Motors (Private)
Limited (HGM), ABDL has decided to replace the existing auditors of HGM in the next annual general meeting and has
approached you for appointment as HGM’s auditors for the next year.

Required:
Explain the responsibilities of your firm and the existing auditors in the above situation under the Code of Ethics for
Chartered Accountants. (05)

Question # 2 Q.1(a, b) Autumn 2022

You are the quality control partner in an audit firm. Following independent matters are presently under your
consideration:
(a) The firm has received an offer for appointment as the auditor of Hyper Limited for the year ending 30 June 2023
in place of the outgoing auditor.

Required:
Discuss the actions that the firm should take regarding communication with the outgoing auditor. (03)

(b) Freshco (Private) Limited (FPL) has asked your firm to help them in implementation of an ERP software. Your
firm has refused to accept the engagement as the firm believes that it does not have the required competencies.
However, the firm has referred FPL to an IT firm which has relevant competencies. As part of arrangement, the IT
firm will pay 15% of fee charged to FPL to your firm.

Required:
Identify and explain the threats to the fundamental principles of ICAP code of ethics. (03)