## Change in Terms of Audit Engagement (SA 210)

### When May a Change Be Requested?

A request to change the terms of the audit engagement may arise from:

1. Change in circumstances affecting the need for the service

2. Misunderstanding as to the nature of the audit or related service originally requested

3. Restriction on the scope of the engagement, whether imposed by management or caused by other circumstances

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### Reasonable vs. Unreasonable Requests

REASONABLE — Auditor can agree:

Change in circumstances affecting entity's requirements (e.g., business diversification, new product lines)
Genuine misunderstanding about the nature of the originally requested service

NOT REASONABLE — Auditor should decline:

Change appears to relate to information that is incorrect, incomplete, or otherwise unsatisfactory
Entity asks to downgrade engagement (e.g., audit → review) specifically to avoid a qualified opinion or disclaimer of opinion

> Classic example of unreasonable request: Auditor cannot obtain sufficient appropriate evidence on receivables → entity asks to change to review engagement to avoid a qualified opinion. This is NOT a valid reason.

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### Auditor's Approach

The auditor must consider the justification given for the request, particularly the implications of any restriction on the scope of the audit engagement.

If the request is unjustified, the auditor should not agree to the change and should consider the implications, including whether it is necessary to withdraw from the engagement.

Worked example

### Example 1

Scenario (MD 7 – 5 Marks): Deepa Ltd. requested the auditor to change from an audit engagement to a review engagement midway through the audit. The management claimed it could not provide complete supporting documentation for a significant portion of receivables, and argued the change would prevent issuance of a qualified opinion. Is this change justified?

Answer: As per SA 210, a change is NOT reasonable when it appears to relate to information that is incorrect, incomplete, or unsatisfactory. Here, Deepa Ltd. explicitly wants the change to avoid a qualified opinion or disclaimer — this is the textbook example of an unjustified request. The auditor should not agree to this change. The request is not justified.

### Example 2

Scenario (RTP May 25): Kamla Limited requested CA Puneet to change the terms of the original audit engagement because the company diversified its business and introduced new products. Can CA Puneet agree?

Answer: Yes. SA 210 recognises that a significant change in the nature or size of the entity's business is one of the factors that may make it appropriate to revise the terms of the audit engagement. Business diversification and introduction of new products constitutes such a significant change. CA Puneet can agree to revise the engagement terms — this is a reasonable and appropriate request.

⚠️ Common exam mistakes

Automatically accepting any request to change engagement terms — the auditor must evaluate the justification carefully
Missing that avoiding a qualified opinion is the classic example of an UNREASONABLE reason to change engagement type
Treating 'restriction on scope' as always unreasonable — it may be a valid reason depending on circumstances
Not recognising that business diversification (significant change in nature/size) is explicitly a valid reason to revise terms

Bare-Act text SA 210 · SA 210 – Agreeing the Terms of Audit Engagements · click to expand

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.

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