MNO & Co, Chartered Accountants, have been auditing Spark Industries Ltd. for the past five years. Recently, there has been a change in the…
CA Intermediate · Auditing and Ethics · PYQS · January 2026
MNO & Co, Chartered Accountants, have been auditing Spark Industries Ltd. for the past five years. Recently, there has been a change in the company's ownership and the new management has shown reluctance in providing complete accounting records and other relevant information for verification. The audit team has faced difficulty in obtaining audit evidence and is unsure whether to continue the audit engagement for the next financial year. As an engagement partner, explain the procedures that MNO & Co. should perform before deciding on the continuance of the client relationship and the audit engagement as part of preliminary engagement activities.
Suggested Answer and Working Notes:
Performing procedures regarding the Continuance of Client Relationships and Audit Engagements: It should be ensured that appropriate procedures regarding the acceptance and continuance of client relationships and audit engagements have been followed and that conclusions reached in this regard are appropriate. The firm should obtain information considered necessary in the circumstances before accepting an engagement with a new client, when deciding whether to continue an existing engagement, and when considering acceptance of a new engagement with an existing client.Evaluate matters such as integrity of principal owners and key management.Assess the competence of engagement team to perform the audit engagement.Implications of matters that have arisen during current and previous audit engagement may need to be considered.Besides, in case of initial engagements, communication with predecessor auditor should be made, where there has been a change of auditors.
Topics: Audit Strategy, Audit Planning and Audit Programme
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