CA Neha Arora was appointed as the statutory auditor of Stellar Healthcare Limited for the financial year 2025-26. During the course of audit, she…

Request from Entity to change the Terms of Audit Engagement-When Reasonable Justification Exists: A request from the entity for the auditor to change the terms of the audit engagement may result from a change in circumstances affecting the need for the service, a misunderstanding as to the nature of an audit as originally requested or a restriction on the scope of the audit engagement, whether imposed by management or caused by other circumstances. The auditor considers the justification given for the request, particularly the implications of a restriction on the scope of the audit engagement. A change in circumstances that affects the entity's requirements or a misunderstanding concerning the nature of the service originally requested may be considered a reasonable basis for requesting a change in the audit engagement. In contrast, a change may not be considered reasonable if it appears that the change relates to information that is incorrect, incomplete or otherwise unsatisfactory. An example might be where the auditor is unable to obtain sufficient appropriate audit evidence regarding receivables and the entity asks for the audit engagement to be changed to a review engagement to avoid a qualified opinion or a disclaimer of opinion. In the given case, the request of the management is not justified. The proposed change in engagement has been sought after the auditor was unable to obtain sufficient appropriate audit evidence regarding trade receivables and a modified opinion was likely. Such a request appears to be an attempt to avoid the consequences of a qualified opinion or disclaimer of opinion. Therefore, the auditor should not regard the request as having a reasonable justification merely because the available audit evidence is incorrect, incomplete or otherwise unsatisfactory.