{"id":"F2006L01364","name":"ASA 210 - Terms of Audit Engagements - April 2006","slug":"asa-210-terms-of-audit-engagements-april-2006","collection":"legislative_instrument","jurisdiction":"commonwealth","status":"repealed","isInForce":false,"actNumber":null,"makingDate":null,"administeringDepartment":null,"currentVersion":{"id":58912,"registerId":"commonwealth-F2006L01364-current","compilationNumber":null,"startDate":"2026-04-02","status":"Repealed","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"Compiled Auditing Standard","sectionType":"section","heading":"Compiled Auditing Standard","content":"###### Compiled Auditing Standard","sortOrder":0},{"sectionNumber":"Obtaining a Copy of Auditing Standards","sectionType":"section","heading":"Obtaining a Copy of Auditing Standards","content":"###### Obtaining a Copy of Auditing Standards\n\nThe most recently compiled versions of Auditing Standards, original Standards and amending Standards (see Compilation Details) are available on the AUASB website: www.auasb.gov.au.\n\nAlternatively, printed copies of Auditing Standards are available by contacting:\n\n| Auditing and Assurance Standards BoardLevel 7600 Bourke StreetMelbourne Victoria 3000AUSTRALIA | Phone: (03) 8080 7400Fax: (03) 8080 7450E-mail: enquiries@auasb.gov.auPostal Address:PO Box 204Collins Street WestMelbourne Victoria 8007AUSTRALIA |\n| ---------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------- |","sortOrder":1},{"sectionNumber":"COPYRIGHT","sectionType":"section","heading":"COPYRIGHT","content":"##### COPYRIGHT\n\n© Commonwealth of Australia 2007. The text, graphics and layout of this compiled Auditing Standard are protected by Australian copyright law and the comparable law of other countries. Reproduction within Australia in unaltered form (retaining this notice) is permitted for personal and non-commercial use subject to the inclusion of an acknowledgment of the source. Requests and enquiries concerning reproduction and rights for commercial purposes within Australia should be addressed to the Principal Executive, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne Victoria 8007. Otherwise, no part of the compiled Auditing Standard may be reproduced, stored or transmitted in any form or by any means without the prior written permission of the AUASB except as permitted by law.\n\nISSN 1833-4393","sortOrder":2},{"sectionNumber":"CONTENTS","sectionType":"part","heading":"CONTENTS","content":"#   \nCONTENTS\n\nCOMPILATION DETAILS\n\nAUTHORITY STATEMENT\n\nParagraphs\n\nApplication.................................. 1-2\n\nOperative Date................................ 3\n\nIntroduction.................................. 4-8\n\nAudit Engagement Letters........................ 9\n\nPrincipal Contents............................. 10-12\n\nAuditor Independence........................... 13-14\n\nAudits of Components........................... 15-17\n\nRecurring Audits.............................. 18-19\n\nAcceptance of a Change in the Terms of Engagement...... 20-29\n\nConformity with International Standards on Auditing...... 30\n\nAppendix 1: Example of an Engagement Letter for a Financial Report Audit Engagement","sortOrder":3},{"sectionNumber":"compilation details","sectionType":"part","heading":"compilation details","content":"###### Obtaining a Copy of Auditing Standards\n\nThe most recently compiled versions of Auditing Standards, original Standards and amending Standards (see Compilation Details) are available on the AUASB website: www.auasb.gov.au.\n\nAlternatively, printed copies of Auditing Standards are available by contacting:\n\n| Auditing and Assurance Standards BoardLevel 7600 Bourke StreetMelbourne Victoria 3000AUSTRALIA | Phone: (03) 8080 7400Fax: (03) 8080 7450E-mail: enquiries@auasb.gov.auPostal Address:PO Box 204Collins Street WestMelbourne Victoria 8007AUSTRALIA |\n| ---------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------- |\n\n##### COPYRIGHT\n\n© Commonwealth of Australia 2007. The text, graphics and layout of this compiled Auditing Standard are protected by Australian copyright law and the comparable law of other countries. Reproduction within Australia in unaltered form (retaining this notice) is permitted for personal and non-commercial use subject to the inclusion of an acknowledgment of the source. Requests and enquiries concerning reproduction and rights for commercial purposes within Australia should be addressed to the Principal Executive, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne Victoria 8007. Otherwise, no part of the compiled Auditing Standard may be reproduced, stored or transmitted in any form or by any means without the prior written permission of the AUASB except as permitted by law.\n\nISSN 1833-4393\n\n#   \nCONTENTS\n\nCOMPILATION DETAILS\n\nAUTHORITY STATEMENT\n\nParagraphs\n\nApplication.................................. 1-2\n\nOperative Date................................ 3\n\nIntroduction.................................. 4-8\n\nAudit Engagement Letters........................ 9\n\nPrincipal Contents............................. 10-12\n\nAuditor Independence........................... 13-14\n\nAudits of Components........................... 15-17\n\nRecurring Audits.............................. 18-19\n\nAcceptance of a Change in the Terms of Engagement...... 20-29\n\nConformity with International Standards on Auditing...... 30\n\nAppendix 1: Example of an Engagement Letter for a Financial Report Audit Engagement\n\n#   \ncompilation details\n\n## Auditing Standard ASA 210 Terms of Audit Engagements as Amended\n\nThis compilation takes into account amendments up to and including 27 June 2007 and was prepared on 27 June 2007 by the staff of the Auditing and Assurance Standards Board (AUASB).\n\nThis compilation is not a separate Auditing Standard made by the AUSB. Instead, it is a representation of ASA 210 (April 2006) as amended by an other Auditing Standard which is listed in the Table below.\n\n#### Table of Standards\n\n| Standard   | Date made     | Operative date                                                           |\n| ---------- | ------------- | ------------------------------------------------------------------------ |\n| ASA 210    | 28 April 2006 | 1 July 2006                                                              |\n| ASA 2007-1 | 27 June 2007  | 1 July 2007 (Auditor’s reports signed and dated on or after 1 July 2007) |\n\n#### Table of Amendments\n\n| Paragraph affected                                                                   | How affected | By … [paragraph] |\n| ------------------------------------------------------------------------------------ | ------------ | ---------------- |\n| Appendix 1 – Example of an Engagement Letter for a Financial Report Audit Engagement | Amended      | ASA 2007-1 [17]  |\n\n##   \nAUTHORITY STATEMENT\n\nAuditing Standard ASA 210 Terms of Audit Engagements (as amended at 27 June 2007) is set out in paragraphs 1 to 30 and Appendix 1.\n\nThis Auditing Standard is to be read in conjunction with the Preamble to AUASB Standards, which sets out the intentions of the AUASB on how the Auditing Standards are to be understood, interpreted and applied.\n\nThe mandatory requirements of this Auditing Standard are set out in bold-type paragraphs.","sortOrder":4},{"sectionNumber":"Auditing Standard ASA 210 Terms of Audit","sectionType":"part","heading":"Auditing Standard ASA 210 Terms of Audit Engagements as Amended","content":"## Auditing Standard ASA 210 Terms of Audit Engagements as Amended\n\nThis compilation takes into account amendments up to and including 27 June 2007 and was prepared on 27 June 2007 by the staff of the Auditing and Assurance Standards Board (AUASB).\n\nThis compilation is not a separate Auditing Standard made by the AUSB. Instead, it is a representation of ASA 210 (April 2006) as amended by an other Auditing Standard which is listed in the Table below.","sortOrder":5},{"sectionNumber":"Table of Standards","sectionType":"subdivision","heading":"Table of Standards","content":"#### Table of Standards\n\n| Standard   | Date made     | Operative date                                                           |\n| ---------- | ------------- | ------------------------------------------------------------------------ |\n| ASA 210    | 28 April 2006 | 1 July 2006                                                              |\n| ASA 2007-1 | 27 June 2007  | 1 July 2007 (Auditor’s reports signed and dated on or after 1 July 2007) |","sortOrder":6},{"sectionNumber":"Table of Amendments","sectionType":"subdivision","heading":"Table of Amendments","content":"#### Table of Amendments\n\n| Paragraph affected                                                                   | How affected | By … [paragraph] |\n| ------------------------------------------------------------------------------------ | ------------ | ---------------- |\n| Appendix 1 – Example of an Engagement Letter for a Financial Report Audit Engagement | Amended      | ASA 2007-1 [17]  |\n\n##   \nAUTHORITY STATEMENT\n\nAuditing Standard ASA 210 Terms of Audit Engagements (as amended at 27 June 2007) is set out in paragraphs 1 to 30 and Appendix 1.\n\nThis Auditing Standard is to be read in conjunction with the Preamble to AUASB Standards, which sets out the intentions of the AUASB on how the Auditing Standards are to be understood, interpreted and applied.\n\nThe mandatory requirements of this Auditing Standard are set out in bold-type paragraphs.","sortOrder":7},{"sectionNumber":"AUTHORITY STATEMENT","sectionType":"part","heading":"AUTHORITY STATEMENT","content":"##   \nAUTHORITY STATEMENT\n\nAuditing Standard ASA 210 Terms of Audit Engagements (as amended at 27 June 2007) is set out in paragraphs 1 to 30 and Appendix 1.\n\nThis Auditing Standard is to be read in conjunction with the Preamble to AUASB Standards, which sets out the intentions of the AUASB on how the Auditing Standards are to be understood, interpreted and applied.\n\nThe mandatory requirements of this Auditing Standard are set out in bold-type paragraphs.","sortOrder":8},{"sectionNumber":"AUDITING STANDARD ASA 210","sectionType":"part","heading":"AUDITING STANDARD ASA 210","content":"## ![](image.002.png)![](image.003.png)AUDITING STANDARD ASA 210\n\n### Terms of Audit Engagements\n\n##### Application\n\n1 This Auditing Standard applies to:\n\n(a) an audit of a financial report for a financial year, or an audit of a financial report for a half-year, in accordance with Part 2M.3 of the Corporations Act 2001; and\n\n(b) an audit of a financial report for any other purpose.\n\n2 This Auditing Standard also applies, as appropriate, to an audit of other financial information.\n\n##### Operative Date\n\n3 This Auditing Standard is operative for financial reporting periods commencing on or after 1 July 2006.  \n\\[Note: For operative dates of paragraphs changed or added by an amending Standard, see Compilation Details.\\]\n\n##### Introduction\n\n4 The purpose of this Auditing Standard is to establish mandatory requirements and to provide explanatory guidance on:\n\n(a) agreeing and documenting the terms of the audit engagement with the entity; and\n\n(b) the auditor’s response to a request by the entity to change the terms of the audit engagement to one that provides a lower level of assurance.\n\n5 The auditor shall agree on the terms of the audit engagement with the entity, which shall be recorded in writing by the auditor and forwarded to the entity. When the audit engagement is undertaken pursuant to legislation, the minimum applicable terms are those contained in the legislation.\n\n6 The agreed terms are ordinarily recorded in an audit engagement letter but may also be recorded in another suitable form of contract.\n\n7 This Auditing Standard is intended to assist the auditor in the preparation of an engagement letter relating to an audit of a financial report.\n\n8 In some instances, the objective and scope of an audit and the auditor’s obligations are established by law. For example, the objective of the audit of a financial report of certain entities is established by the Corporations Act 2001. Even in those situations, auditors may still find engagement letters informative for their clients.\n\n##### Audit Engagement Letters\n\n9 It is in the interests of both the entity and the auditor that the auditor sends an engagement letter, preferably before the commencement of the audit, to help avoid misunderstandings with respect to the engagement. Ordinarily, the engagement letter documents and confirms the auditor’s acceptance of the appointment, the objective and scope of the audit, the extent of the auditor’s responsibilities to the entity and the form of any reports.\n\nPrincipal Contents\n\n10 The form and content of audit engagement letters may vary for each entity, but they would generally include reference to:\n\n-   The objective of the audit of the financial report.\n-   Management’s responsibility, with oversight from those charged with governance, for the subject matter of the audit as described in ASA 200 Objective and General Principles Governing an Audit of a Financial Report.\n-   The scope of the audit, including reference to applicable regulations and the relevant ethical requirements relating to audit engagements to which the auditor adheres.\n-   The form of any reports or other communication of results of the engagement.\n-   The fact that because of the test nature and other inherent limitations of an audit, together with the inherent limitations of internal control, there is an unavoidable risk that even some material misstatement may remain undiscovered.\n-   Unrestricted access to whatever records, documentation and other information is requested in connection with the audit.\n\n11 The auditor may also wish to include in the engagement letter:\n\n-   Arrangements regarding the planning and performance of the audit.\n-   Expectation of receiving from management written confirmation concerning representations made in connection with the audit.\n-   Request for the entity to confirm the terms of the engagement by acknowledging receipt of the engagement letter.\n-   Description of any other letters or reports the auditor expects to issue to the entity.\n-   Basis on which fees are computed and any billing arrangements.\n\n12 When relevant, the following points could also be included:\n\n-   Arrangements concerning the involvement of other auditors and experts in some aspects of the audit.\n-   Arrangements concerning the involvement of internal auditors and other entity staff.\n-   Arrangements to be made with the predecessor auditor, if any, in the case of an initial audit.\n-   Any restriction of the auditor’s liability when such possibility exists.\n-   A reference to any further agreements between the auditor and the entity.\n-   A reference to other applicable legislation such as the privacy legislation.\n-   Clarification of the entity’s responsibility for control issues relevant to the presentation of electronic information, where the entity’s audited financial report (or other audited subject matter) is presented on an internet web site.\n-   For special purpose audit engagements, a reference to the auditor not assuming any responsibility for reliance on the audited financial report (or other audited subject matter) if it is used or disseminated other than for the stated purpose for which it was intended (for example, when the audited financial report is released to third parties without the auditor’s consent).\n\nAn example of an audit engagement letter is set out in Appendix 1.\n\nAuditor Independence\n\n13 When the audit is conducted in accordance with Part 2M.3 of the Corporations Act 2001, the auditor ordinarily includes in the written terms of the engagement:\n\n-   A statement confirming that, to the best of the auditor’s knowledge and belief, the auditor currently meets the independence requirements of the Corporations Act 2001 in relation to the audit of the financial report.\n-   A statement confirming that, should the auditor become aware that the auditor has contravened the independence requirements of the Corporations Act 2001, the auditor will notify the entity on a timely basis.\n\n14 The Corporations Act 2001 contains general and specific provisions in relation to auditor independence, a range of specific restrictions on the employment relationships existing between the audited entity and its auditor and provisions relating to the auditor’s attendance at an entity’s annual general meeting, which the auditor may also include in the engagement letter.\n\nAudits of Components\n\n15 When the auditor of a parent entity is also the auditor of its subsidiary, branch or division (component), the factors that influence the auditor’s decision whether to send a separate engagement letter to the component include:\n\n-   Who appoints the auditor of the component.\n-   Whether a separate audit report is to be issued on the component.\n-   Legal requirements.\n-   The extent of any work performed by other auditors.\n-   The degree of ownership by the parent entity.\n-   The degree of independence of the component management.\n-   Whether the terms of engagement for each component are the same.\n-   Relevant regulatory requirements.\n\n16 The auditor may send one engagement letter relating to the group as a whole. In such cases, the auditor ordinarily identifies each component of the entity whose financial report is to be audited, the date and period covered by the financial report and any other relevant reporting requirements.\n\n17 The terms of the engagement shall identify the applicable financial reporting framework.\n\n##### Recurring Audits\n\n18 On recurring audits, the auditor shall consider whether circumstances require the terms of the engagement to be revised, and whether there is a need to re-confirm in writing the existing terms of the engagement with the entity.\n\n19 The auditor may decide not to send a new engagement letter each period. However, the following factors may make it appropriate to send a new engagement letter:\n\n-   Any indication that the entity misunderstands the objective and scope of the audit.\n-   Any revised or special terms of the engagement.\n-   A recent change of senior management or those charged with governance.\n-   A significant change in ownership.\n-   A significant change in the nature or size of the entity’s business.\n-   Legal or regulatory requirements.\n\n##### Acceptance of a Change in the Terms of the Engagement\n\n20 The auditor who, before the completion of the engagement, is requested to change the engagement to one which provides a lower level of assurance, shall consider the appropriateness of doing so.\n\n21 A request from the entity for the auditor to change the terms of the engagement may result from a change in circumstances affecting the need for the service, a misunderstanding as to the nature of the audit or related service originally requested or a restriction on the scope of the engagement, whether imposed by management or caused by circumstances. Under paragraph 26 of this Auditing Standard, the auditor needs to carefully consider the reason given for the request, particularly the implications of a restriction on the scope of the engagement.\n\n22 A change in circumstances that affects the entity’s requirements, or a misunderstanding concerning the nature of the service originally requested, is ordinarily considered to be a reasonable basis for requesting a change in the engagement. In contrast, a change is not considered to be reasonable if it appears that the change relates to information that is incorrect, incomplete or otherwise unsatisfactory.\n\n23 Before agreeing to change the audit engagement to a review[\\[1\\]](#_ftn1) or related service engagement, an auditor who was engaged to perform the audit in accordance with Auditing Standards ordinarily considers, in addition to the above matters, any legal or contractual implications of the change.\n\n24 If the auditor concludes that there is reasonable justification to change the terms of the engagement and if the audit work performed complies with the Auditing Standards relevant to the changed terms of the engagement, the report issued would be that appropriate for the revised terms of the engagement. In order to avoid confusing the user, the report would not ordinarily include reference to:\n\n(a) the original engagement; or\n\n(b) any procedures that may have been performed in the original engagement, except where the engagement is changed to an engagement to undertake agreed-upon procedures and thus reference to the procedures performed is a normal part of the report.\n\n25 Where the terms of the engagement are changed the auditor shall agree on the new terms with the entity and confirm them in writing.\n\n26 The auditor shall not agree to a change in the terms of the engagement where there is no reasonable justification for doing so.\n\n27 An example of where there is no reasonable justification might be an audit engagement where the auditor is unable to obtain sufficient appropriate audit evidence regarding receivables and the client asks for the engagement to be changed to a review engagement to avoid a qualified audit opinion or a disclaimer of opinion.\n\n28 If the auditor is unable to agree to a change in the terms of the engagement and is not permitted to continue the original engagement, unless prohibited by law or regulation, the auditor shall withdraw from the engagement and consider whether there is any obligation, either contractual or otherwise, to report to other parties, such as those charged with governance or shareholders, the circumstances necessitating the withdrawal.\n\n29 In some cases, law or regulation may limit the auditor’s ability to withdraw from the engagement. In such cases, the auditor ordinarily considers the effect on the auditor’s report.\n\n##### Conformity with International Standards on Auditing\n\n30 Except as noted below, this Auditing Standard conforms with International Standard on Auditing ISA 210 Terms of Audit Engagements, issued by the International Auditing and Assurance Standards Board of the International Federation of Accountants. The main differences between this Auditing Standard and ISA 210 are:\n\n-   This Auditing Standard contains mandatory requirements for the auditor to record the agreed terms of the audit engagement in writing and forward them to the entity (paragraphs 5, 18 and 25). ISA 210 does not require the terms of the audit engagement to be recorded in writing.\n-   This Auditing Standard contains a mandatory requirement that where the audit is undertaken pursuant to legislation, the minimum applicable terms in an engagement letter are those contained in the legislation whereas ISA 210 does not (paragraph 5).\n-   This Auditing Standard contains explanatory guidance on documenting certain matters in the engagement letter relating to auditor independence where the engagement is conducted pursuant to Part 2M.3 of the Corporations Act 2001 (paragraphs 13 and 14). ISA 210 does not require the auditor to document certain matters in the engagement letter relating to auditor independence.\n-   This Auditing Standard provides explanatory guidance relating to circumstances where the auditor of a parent entity is also the auditor of its component and elects to send one engagement letter relating to a group as a whole (the audit of components), whereas ISA 210 does not (paragraphs 15 and 16).\n-   The example engagement letter in Appendix 1 of this Auditing Standard includes matters relating to auditor independence and the presentation of the financial report on the internet, whereas ISA 210 does not.\n-   This Auditing Standard does not include a separate section on the public sector as it is sector neutral. ISA 210 includes a Public Sector Perspective section.\n\nCompliance with this Auditing Standard enables compliance with ISA 210.","sortOrder":9},{"sectionNumber":"Terms of Audit Engagements","sectionType":"division","heading":"Terms of Audit Engagements","content":"## ![](image.002.png)![](image.003.png)AUDITING STANDARD ASA 210\n\n### Terms of Audit Engagements\n\n##### Application\n\n1 This Auditing Standard applies to:\n\n(a) an audit of a financial report for a financial year, or an audit of a financial report for a half-year, in accordance with Part 2M.3 of the Corporations Act 2001; and\n\n(b) an audit of a financial report for any other purpose.\n\n2 This Auditing Standard also applies, as appropriate, to an audit of other financial information.\n\n##### Operative Date\n\n3 This Auditing Standard is operative for financial reporting periods commencing on or after 1 July 2006.  \n\\[Note: For operative dates of paragraphs changed or added by an amending Standard, see Compilation Details.\\]\n\n##### Introduction\n\n4 The purpose of this Auditing Standard is to establish mandatory requirements and to provide explanatory guidance on:\n\n(a) agreeing and documenting the terms of the audit engagement with the entity; and\n\n(b) the auditor’s response to a request by the entity to change the terms of the audit engagement to one that provides a lower level of assurance.\n\n5 The auditor shall agree on the terms of the audit engagement with the entity, which shall be recorded in writing by the auditor and forwarded to the entity. When the audit engagement is undertaken pursuant to legislation, the minimum applicable terms are those contained in the legislation.\n\n6 The agreed terms are ordinarily recorded in an audit engagement letter but may also be recorded in another suitable form of contract.\n\n7 This Auditing Standard is intended to assist the auditor in the preparation of an engagement letter relating to an audit of a financial report.\n\n8 In some instances, the objective and scope of an audit and the auditor’s obligations are established by law. For example, the objective of the audit of a financial report of certain entities is established by the Corporations Act 2001. Even in those situations, auditors may still find engagement letters informative for their clients.\n\n##### Audit Engagement Letters\n\n9 It is in the interests of both the entity and the auditor that the auditor sends an engagement letter, preferably before the commencement of the audit, to help avoid misunderstandings with respect to the engagement. Ordinarily, the engagement letter documents and confirms the auditor’s acceptance of the appointment, the objective and scope of the audit, the extent of the auditor’s responsibilities to the entity and the form of any reports.\n\nPrincipal Contents\n\n10 The form and content of audit engagement letters may vary for each entity, but they would generally include reference to:\n\n-   The objective of the audit of the financial report.\n-   Management’s responsibility, with oversight from those charged with governance, for the subject matter of the audit as described in ASA 200 Objective and General Principles Governing an Audit of a Financial Report.\n-   The scope of the audit, including reference to applicable regulations and the relevant ethical requirements relating to audit engagements to which the auditor adheres.\n-   The form of any reports or other communication of results of the engagement.\n-   The fact that because of the test nature and other inherent limitations of an audit, together with the inherent limitations of internal control, there is an unavoidable risk that even some material misstatement may remain undiscovered.\n-   Unrestricted access to whatever records, documentation and other information is requested in connection with the audit.\n\n11 The auditor may also wish to include in the engagement letter:\n\n-   Arrangements regarding the planning and performance of the audit.\n-   Expectation of receiving from management written confirmation concerning representations made in connection with the audit.\n-   Request for the entity to confirm the terms of the engagement by acknowledging receipt of the engagement letter.\n-   Description of any other letters or reports the auditor expects to issue to the entity.\n-   Basis on which fees are computed and any billing arrangements.\n\n12 When relevant, the following points could also be included:\n\n-   Arrangements concerning the involvement of other auditors and experts in some aspects of the audit.\n-   Arrangements concerning the involvement of internal auditors and other entity staff.\n-   Arrangements to be made with the predecessor auditor, if any, in the case of an initial audit.\n-   Any restriction of the auditor’s liability when such possibility exists.\n-   A reference to any further agreements between the auditor and the entity.\n-   A reference to other applicable legislation such as the privacy legislation.\n-   Clarification of the entity’s responsibility for control issues relevant to the presentation of electronic information, where the entity’s audited financial report (or other audited subject matter) is presented on an internet web site.\n-   For special purpose audit engagements, a reference to the auditor not assuming any responsibility for reliance on the audited financial report (or other audited subject matter) if it is used or disseminated other than for the stated purpose for which it was intended (for example, when the audited financial report is released to third parties without the auditor’s consent).\n\nAn example of an audit engagement letter is set out in Appendix 1.\n\nAuditor Independence\n\n13 When the audit is conducted in accordance with Part 2M.3 of the Corporations Act 2001, the auditor ordinarily includes in the written terms of the engagement:\n\n-   A statement confirming that, to the best of the auditor’s knowledge and belief, the auditor currently meets the independence requirements of the Corporations Act 2001 in relation to the audit of the financial report.\n-   A statement confirming that, should the auditor become aware that the auditor has contravened the independence requirements of the Corporations Act 2001, the auditor will notify the entity on a timely basis.\n\n14 The Corporations Act 2001 contains general and specific provisions in relation to auditor independence, a range of specific restrictions on the employment relationships existing between the audited entity and its auditor and provisions relating to the auditor’s attendance at an entity’s annual general meeting, which the auditor may also include in the engagement letter.\n\nAudits of Components\n\n15 When the auditor of a parent entity is also the auditor of its subsidiary, branch or division (component), the factors that influence the auditor’s decision whether to send a separate engagement letter to the component include:\n\n-   Who appoints the auditor of the component.\n-   Whether a separate audit report is to be issued on the component.\n-   Legal requirements.\n-   The extent of any work performed by other auditors.\n-   The degree of ownership by the parent entity.\n-   The degree of independence of the component management.\n-   Whether the terms of engagement for each component are the same.\n-   Relevant regulatory requirements.\n\n16 The auditor may send one engagement letter relating to the group as a whole. In such cases, the auditor ordinarily identifies each component of the entity whose financial report is to be audited, the date and period covered by the financial report and any other relevant reporting requirements.\n\n17 The terms of the engagement shall identify the applicable financial reporting framework.\n\n##### Recurring Audits\n\n18 On recurring audits, the auditor shall consider whether circumstances require the terms of the engagement to be revised, and whether there is a need to re-confirm in writing the existing terms of the engagement with the entity.\n\n19 The auditor may decide not to send a new engagement letter each period. However, the following factors may make it appropriate to send a new engagement letter:\n\n-   Any indication that the entity misunderstands the objective and scope of the audit.\n-   Any revised or special terms of the engagement.\n-   A recent change of senior management or those charged with governance.\n-   A significant change in ownership.\n-   A significant change in the nature or size of the entity’s business.\n-   Legal or regulatory requirements.\n\n##### Acceptance of a Change in the Terms of the Engagement\n\n20 The auditor who, before the completion of the engagement, is requested to change the engagement to one which provides a lower level of assurance, shall consider the appropriateness of doing so.\n\n21 A request from the entity for the auditor to change the terms of the engagement may result from a change in circumstances affecting the need for the service, a misunderstanding as to the nature of the audit or related service originally requested or a restriction on the scope of the engagement, whether imposed by management or caused by circumstances. Under paragraph 26 of this Auditing Standard, the auditor needs to carefully consider the reason given for the request, particularly the implications of a restriction on the scope of the engagement.\n\n22 A change in circumstances that affects the entity’s requirements, or a misunderstanding concerning the nature of the service originally requested, is ordinarily considered to be a reasonable basis for requesting a change in the engagement. In contrast, a change is not considered to be reasonable if it appears that the change relates to information that is incorrect, incomplete or otherwise unsatisfactory.\n\n23 Before agreeing to change the audit engagement to a review[\\[1\\]](#_ftn1) or related service engagement, an auditor who was engaged to perform the audit in accordance with Auditing Standards ordinarily considers, in addition to the above matters, any legal or contractual implications of the change.\n\n24 If the auditor concludes that there is reasonable justification to change the terms of the engagement and if the audit work performed complies with the Auditing Standards relevant to the changed terms of the engagement, the report issued would be that appropriate for the revised terms of the engagement. In order to avoid confusing the user, the report would not ordinarily include reference to:\n\n(a) the original engagement; or\n\n(b) any procedures that may have been performed in the original engagement, except where the engagement is changed to an engagement to undertake agreed-upon procedures and thus reference to the procedures performed is a normal part of the report.\n\n25 Where the terms of the engagement are changed the auditor shall agree on the new terms with the entity and confirm them in writing.\n\n26 The auditor shall not agree to a change in the terms of the engagement where there is no reasonable justification for doing so.\n\n27 An example of where there is no reasonable justification might be an audit engagement where the auditor is unable to obtain sufficient appropriate audit evidence regarding receivables and the client asks for the engagement to be changed to a review engagement to avoid a qualified audit opinion or a disclaimer of opinion.\n\n28 If the auditor is unable to agree to a change in the terms of the engagement and is not permitted to continue the original engagement, unless prohibited by law or regulation, the auditor shall withdraw from the engagement and consider whether there is any obligation, either contractual or otherwise, to report to other parties, such as those charged with governance or shareholders, the circumstances necessitating the withdrawal.\n\n29 In some cases, law or regulation may limit the auditor’s ability to withdraw from the engagement. In such cases, the auditor ordinarily considers the effect on the auditor’s report.\n\n##### Conformity with International Standards on Auditing\n\n30 Except as noted below, this Auditing Standard conforms with International Standard on Auditing ISA 210 Terms of Audit Engagements, issued by the International Auditing and Assurance Standards Board of the International Federation of Accountants. The main differences between this Auditing Standard and ISA 210 are:\n\n-   This Auditing Standard contains mandatory requirements for the auditor to record the agreed terms of the audit engagement in writing and forward them to the entity (paragraphs 5, 18 and 25). ISA 210 does not require the terms of the audit engagement to be recorded in writing.\n-   This Auditing Standard contains a mandatory requirement that where the audit is undertaken pursuant to legislation, the minimum applicable terms in an engagement letter are those contained in the legislation whereas ISA 210 does not (paragraph 5).\n-   This Auditing Standard contains explanatory guidance on documenting certain matters in the engagement letter relating to auditor independence where the engagement is conducted pursuant to Part 2M.3 of the Corporations Act 2001 (paragraphs 13 and 14). ISA 210 does not require the auditor to document certain matters in the engagement letter relating to auditor independence.\n-   This Auditing Standard provides explanatory guidance relating to circumstances where the auditor of a parent entity is also the auditor of its component and elects to send one engagement letter relating to a group as a whole (the audit of components), whereas ISA 210 does not (paragraphs 15 and 16).\n-   The example engagement letter in Appendix 1 of this Auditing Standard includes matters relating to auditor independence and the presentation of the financial report on the internet, whereas ISA 210 does not.\n-   This Auditing Standard does not include a separate section on the public sector as it is sector neutral. ISA 210 includes a Public Sector Perspective section.\n\nCompliance with this Auditing Standard enables compliance with ISA 210.","sortOrder":10},{"sectionNumber":"Application","sectionType":"section","heading":"Application","content":"##### Application\n\n1 This Auditing Standard applies to:\n\n(a) an audit of a financial report for a financial year, or an audit of a financial report for a half-year, in accordance with Part 2M.3 of the Corporations Act 2001; and\n\n(b) an audit of a financial report for any other purpose.\n\n2 This Auditing Standard also applies, as appropriate, to an audit of other financial information.","sortOrder":11},{"sectionNumber":"Operative Date","sectionType":"section","heading":"Operative Date","content":"##### Operative Date\n\n3 This Auditing Standard is operative for financial reporting periods commencing on or after 1 July 2006.  \n\\[Note: For operative dates of paragraphs changed or added by an amending Standard, see Compilation Details.\\]","sortOrder":12},{"sectionNumber":"Introduction","sectionType":"section","heading":"Introduction","content":"##### Introduction\n\n4 The purpose of this Auditing Standard is to establish mandatory requirements and to provide explanatory guidance on:\n\n(a) agreeing and documenting the terms of the audit engagement with the entity; and\n\n(b) the auditor’s response to a request by the entity to change the terms of the audit engagement to one that provides a lower level of assurance.\n\n5 The auditor shall agree on the terms of the audit engagement with the entity, which shall be recorded in writing by the auditor and forwarded to the entity. When the audit engagement is undertaken pursuant to legislation, the minimum applicable terms are those contained in the legislation.\n\n6 The agreed terms are ordinarily recorded in an audit engagement letter but may also be recorded in another suitable form of contract.\n\n7 This Auditing Standard is intended to assist the auditor in the preparation of an engagement letter relating to an audit of a financial report.\n\n8 In some instances, the objective and scope of an audit and the auditor’s obligations are established by law. For example, the objective of the audit of a financial report of certain entities is established by the Corporations Act 2001. Even in those situations, auditors may still find engagement letters informative for their clients.","sortOrder":13},{"sectionNumber":"Audit Engagement Letters","sectionType":"section","heading":"Audit Engagement Letters","content":"##### Audit Engagement Letters\n\n9 It is in the interests of both the entity and the auditor that the auditor sends an engagement letter, preferably before the commencement of the audit, to help avoid misunderstandings with respect to the engagement. Ordinarily, the engagement letter documents and confirms the auditor’s acceptance of the appointment, the objective and scope of the audit, the extent of the auditor’s responsibilities to the entity and the form of any reports.\n\nPrincipal Contents\n\n10 The form and content of audit engagement letters may vary for each entity, but they would generally include reference to:\n\n-   The objective of the audit of the financial report.\n-   Management’s responsibility, with oversight from those charged with governance, for the subject matter of the audit as described in ASA 200 Objective and General Principles Governing an Audit of a Financial Report.\n-   The scope of the audit, including reference to applicable regulations and the relevant ethical requirements relating to audit engagements to which the auditor adheres.\n-   The form of any reports or other communication of results of the engagement.\n-   The fact that because of the test nature and other inherent limitations of an audit, together with the inherent limitations of internal control, there is an unavoidable risk that even some material misstatement may remain undiscovered.\n-   Unrestricted access to whatever records, documentation and other information is requested in connection with the audit.\n\n11 The auditor may also wish to include in the engagement letter:\n\n-   Arrangements regarding the planning and performance of the audit.\n-   Expectation of receiving from management written confirmation concerning representations made in connection with the audit.\n-   Request for the entity to confirm the terms of the engagement by acknowledging receipt of the engagement letter.\n-   Description of any other letters or reports the auditor expects to issue to the entity.\n-   Basis on which fees are computed and any billing arrangements.\n\n12 When relevant, the following points could also be included:\n\n-   Arrangements concerning the involvement of other auditors and experts in some aspects of the audit.\n-   Arrangements concerning the involvement of internal auditors and other entity staff.\n-   Arrangements to be made with the predecessor auditor, if any, in the case of an initial audit.\n-   Any restriction of the auditor’s liability when such possibility exists.\n-   A reference to any further agreements between the auditor and the entity.\n-   A reference to other applicable legislation such as the privacy legislation.\n-   Clarification of the entity’s responsibility for control issues relevant to the presentation of electronic information, where the entity’s audited financial report (or other audited subject matter) is presented on an internet web site.\n-   For special purpose audit engagements, a reference to the auditor not assuming any responsibility for reliance on the audited financial report (or other audited subject matter) if it is used or disseminated other than for the stated purpose for which it was intended (for example, when the audited financial report is released to third parties without the auditor’s consent).\n\nAn example of an audit engagement letter is set out in Appendix 1.\n\nAuditor Independence\n\n13 When the audit is conducted in accordance with Part 2M.3 of the Corporations Act 2001, the auditor ordinarily includes in the written terms of the engagement:\n\n-   A statement confirming that, to the best of the auditor’s knowledge and belief, the auditor currently meets the independence requirements of the Corporations Act 2001 in relation to the audit of the financial report.\n-   A statement confirming that, should the auditor become aware that the auditor has contravened the independence requirements of the Corporations Act 2001, the auditor will notify the entity on a timely basis.\n\n14 The Corporations Act 2001 contains general and specific provisions in relation to auditor independence, a range of specific restrictions on the employment relationships existing between the audited entity and its auditor and provisions relating to the auditor’s attendance at an entity’s annual general meeting, which the auditor may also include in the engagement letter.\n\nAudits of Components\n\n15 When the auditor of a parent entity is also the auditor of its subsidiary, branch or division (component), the factors that influence the auditor’s decision whether to send a separate engagement letter to the component include:\n\n-   Who appoints the auditor of the component.\n-   Whether a separate audit report is to be issued on the component.\n-   Legal requirements.\n-   The extent of any work performed by other auditors.\n-   The degree of ownership by the parent entity.\n-   The degree of independence of the component management.\n-   Whether the terms of engagement for each component are the same.\n-   Relevant regulatory requirements.\n\n16 The auditor may send one engagement letter relating to the group as a whole. In such cases, the auditor ordinarily identifies each component of the entity whose financial report is to be audited, the date and period covered by the financial report and any other relevant reporting requirements.\n\n17 The terms of the engagement shall identify the applicable financial reporting framework.","sortOrder":14},{"sectionNumber":"Recurring Audits","sectionType":"section","heading":"Recurring Audits","content":"##### Recurring Audits\n\n18 On recurring audits, the auditor shall consider whether circumstances require the terms of the engagement to be revised, and whether there is a need to re-confirm in writing the existing terms of the engagement with the entity.\n\n19 The auditor may decide not to send a new engagement letter each period. However, the following factors may make it appropriate to send a new engagement letter:\n\n-   Any indication that the entity misunderstands the objective and scope of the audit.\n-   Any revised or special terms of the engagement.\n-   A recent change of senior management or those charged with governance.\n-   A significant change in ownership.\n-   A significant change in the nature or size of the entity’s business.\n-   Legal or regulatory requirements.","sortOrder":15},{"sectionNumber":"Acceptance of a Change in the Terms of t","sectionType":"section","heading":"Acceptance of a Change in the Terms of the Engagement","content":"##### Acceptance of a Change in the Terms of the Engagement\n\n20 The auditor who, before the completion of the engagement, is requested to change the engagement to one which provides a lower level of assurance, shall consider the appropriateness of doing so.\n\n21 A request from the entity for the auditor to change the terms of the engagement may result from a change in circumstances affecting the need for the service, a misunderstanding as to the nature of the audit or related service originally requested or a restriction on the scope of the engagement, whether imposed by management or caused by circumstances. Under paragraph 26 of this Auditing Standard, the auditor needs to carefully consider the reason given for the request, particularly the implications of a restriction on the scope of the engagement.\n\n22 A change in circumstances that affects the entity’s requirements, or a misunderstanding concerning the nature of the service originally requested, is ordinarily considered to be a reasonable basis for requesting a change in the engagement. In contrast, a change is not considered to be reasonable if it appears that the change relates to information that is incorrect, incomplete or otherwise unsatisfactory.\n\n23 Before agreeing to change the audit engagement to a review[\\[1\\]](#_ftn1) or related service engagement, an auditor who was engaged to perform the audit in accordance with Auditing Standards ordinarily considers, in addition to the above matters, any legal or contractual implications of the change.\n\n24 If the auditor concludes that there is reasonable justification to change the terms of the engagement and if the audit work performed complies with the Auditing Standards relevant to the changed terms of the engagement, the report issued would be that appropriate for the revised terms of the engagement. In order to avoid confusing the user, the report would not ordinarily include reference to:\n\n(a) the original engagement; or\n\n(b) any procedures that may have been performed in the original engagement, except where the engagement is changed to an engagement to undertake agreed-upon procedures and thus reference to the procedures performed is a normal part of the report.\n\n25 Where the terms of the engagement are changed the auditor shall agree on the new terms with the entity and confirm them in writing.\n\n26 The auditor shall not agree to a change in the terms of the engagement where there is no reasonable justification for doing so.\n\n27 An example of where there is no reasonable justification might be an audit engagement where the auditor is unable to obtain sufficient appropriate audit evidence regarding receivables and the client asks for the engagement to be changed to a review engagement to avoid a qualified audit opinion or a disclaimer of opinion.\n\n28 If the auditor is unable to agree to a change in the terms of the engagement and is not permitted to continue the original engagement, unless prohibited by law or regulation, the auditor shall withdraw from the engagement and consider whether there is any obligation, either contractual or otherwise, to report to other parties, such as those charged with governance or shareholders, the circumstances necessitating the withdrawal.\n\n29 In some cases, law or regulation may limit the auditor’s ability to withdraw from the engagement. In such cases, the auditor ordinarily considers the effect on the auditor’s report.","sortOrder":16},{"sectionNumber":"Conformity with International Standards ","sectionType":"section","heading":"Conformity with International Standards on Auditing","content":"##### Conformity with International Standards on Auditing\n\n30 Except as noted below, this Auditing Standard conforms with International Standard on Auditing ISA 210 Terms of Audit Engagements, issued by the International Auditing and Assurance Standards Board of the International Federation of Accountants. The main differences between this Auditing Standard and ISA 210 are:\n\n-   This Auditing Standard contains mandatory requirements for the auditor to record the agreed terms of the audit engagement in writing and forward them to the entity (paragraphs 5, 18 and 25). ISA 210 does not require the terms of the audit engagement to be recorded in writing.\n-   This Auditing Standard contains a mandatory requirement that where the audit is undertaken pursuant to legislation, the minimum applicable terms in an engagement letter are those contained in the legislation whereas ISA 210 does not (paragraph 5).\n-   This Auditing Standard contains explanatory guidance on documenting certain matters in the engagement letter relating to auditor independence where the engagement is conducted pursuant to Part 2M.3 of the Corporations Act 2001 (paragraphs 13 and 14). ISA 210 does not require the auditor to document certain matters in the engagement letter relating to auditor independence.\n-   This Auditing Standard provides explanatory guidance relating to circumstances where the auditor of a parent entity is also the auditor of its component and elects to send one engagement letter relating to a group as a whole (the audit of components), whereas ISA 210 does not (paragraphs 15 and 16).\n-   The example engagement letter in Appendix 1 of this Auditing Standard includes matters relating to auditor independence and the presentation of the financial report on the internet, whereas ISA 210 does not.\n-   This Auditing Standard does not include a separate section on the public sector as it is sector neutral. ISA 210 includes a Public Sector Perspective section.\n\nCompliance with this Auditing Standard enables compliance with ISA 210.","sortOrder":17},{"sectionNumber":"APPENDIX 1","sectionType":"section","heading":"APPENDIX 1","content":"##### APPENDIX 1\n\n##### EXAMPLE OF AN ENGAGEMENT LETTER FOR A FINANCIAL REPORT AUDIT ENGAGEMENT\n\nThe following example audit engagement letter is for use as a guide only, in conjunction with the mandatory requirements and explanatory guidance in this Auditing Standard, and will need to be varied according to individual needs and circumstances. The engagement letter is written in the context of an engagement to audit a general purpose financial report under the Corporations Act 2001.\n\nTo \\[the board of directors, those charged with governance or the appropriate representative of senior management\\]:\n\nScope\n\nYou have requested that we audit the financial report of \\[name of entity\\], which comprises the balance sheet as at 30 June 20XX, and the income statement, statement of changes in equity and cash flow statement for the year then ended, a summary of significant accounting policies, other explanatory notes and the directors’ declaration. We are pleased to confirm our acceptance and our understanding of this engagement by means of this letter. Our audit will be conducted with the objective of our expressing an opinion on the financial report.\n\nWe will conduct our audit in accordance with Australian Auditing Standards. Those Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing audit procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. An audit also includes evaluating the appropriateness of the financial reporting framework, accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial report.\n\nBecause of the test nature and other inherent limitations of an audit, together with the inherent limitations of any accounting and internal control system, there is an unavoidable risk that even some material misstatements may remain undiscovered.\n\nIn making our risk assessments, we consider internal control relevant to the entity’s preparation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. However, we expect to provide you with a separate letter concerning any material weaknesses in the design or implementation of internal control over financial reporting that come to our attention during the audit of the financial report.[\\[2\\]](#_ftn2)\n\nWe take this opportunity to remind you that the responsibility for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards[\\[3\\]](#_ftn3) (including the Australian Accounting Interpretations) and the Corporations Act 2001 is that of \\[the directors, those charged with governance or insert title\\]. Our auditor’s report will explain that \\[the directors, those charged with governance or insert title\\] are responsible for the preparation and the fair presentation of the financial report in accordance with the applicable financial reporting framework and this responsibility includes:\n\n-   establishing and maintaining internal controls relevant to the preparation of a financial report that is free from misstatement, whether due to fraud or error;\n-   selecting and applying appropriate accounting policies; and\n-   making accounting estimates that are reasonable in the circumstances.\n\nAs part of our audit process, we will request from management written confirmation concerning representations made to us in connection with the audit.\n\nOther Matters under the Corporations Act 2001\n\nIndependence\n\nWe confirm that, to the best of our knowledge and belief, we currently meet the independence requirements of the Corporations Act 2001 in relation to the audit of the financial report. In conducting our audit of the financial report, should we become aware that we have contravened the independence requirements of the Corporations Act 2001, we shall notify you on a timely basis. As part of our audit process, we shall also provide you with a written independence declaration as required by the Corporations Act 2001.\n\nThe Corporations Act 2001 includes specific restrictions on the employment relationships that can exist between the audited entity and its auditors. To assist us in meeting the independence requirements of the Corporations Act 2001, and to the extent permitted by law and regulation, we request you discuss with us:\n\n-   the provision of services offered to you by \\[insert firm name\\] prior to engaging or accepting the service; and\n-   the prospective employment opportunities of any current or former partner or professional employee of \\[insert firm name\\] prior to the commencement of formal employment discussions with the current or former partner or professional employee.\n\nAnnual General Meetings\n\nThe Corporations Act 2001 provides that shareholders can submit written questions to the auditor before an Annual General Meeting provided that they relate to the auditor’s report or the conduct of the audit. To assist us in meeting this requirement in the Corporations Act 2001 relating to Annual General Meetings, we request you provide to us written questions submitted to you by shareholders as soon as practicable after the question(s) is received and no later than five business days before the Annual General Meeting, regardless of whether you believe them to be irrelevant.\n\nPresentation of Audited Financial Report on the Internet\n\nIt is our understanding that the entity intends to publish a hard copy of the audited financial report and auditor’s report for members, and to electronically present the audited financial report and auditor’s report on its internet web site. When information is presented electronically on a web site, the security and controls over information on the web site should be addressed by the entity to maintain the integrity of the data presented. The examination of the controls over the electronic presentation of audited financial information on the entity’s web site is beyond the scope of the audit of the financial report. Responsibility for the electronic presentation of the financial report on the entity’s web site is that of the governing body of the entity.\n\n  \nFees\n\nWe look forward to full cooperation from your staff and we trust that they will make available to us whatever records, documentation and other information we request in connection with our audit.\n\n\\[Insert additional information here regarding fee arrangements and billings, as appropriate.\\]\n\nPlease sign and return the attached copy of this letter to indicate that it is in accordance with your understanding of the arrangements for our audit of the financial report.\n\nYours faithfully,\n\n(signed)\n\n...............................\n\nName and Title\n\nDate\n\nAcknowledged on behalf of \\[entity\\] by (signed)\n\n...............................\n\nName and Title\n\nDate","sortOrder":18},{"sectionNumber":"EXAMPLE OF AN ENGAGEMENT LETTER FOR A FI","sectionType":"section","heading":"EXAMPLE OF AN ENGAGEMENT LETTER FOR A FINANCIAL REPORT AUDIT ENGAGEMENT","content":"##### EXAMPLE OF AN ENGAGEMENT LETTER FOR A FINANCIAL REPORT AUDIT ENGAGEMENT\n\nThe following example audit engagement letter is for use as a guide only, in conjunction with the mandatory requirements and explanatory guidance in this Auditing Standard, and will need to be varied according to individual needs and circumstances. The engagement letter is written in the context of an engagement to audit a general purpose financial report under the Corporations Act 2001.\n\nTo \\[the board of directors, those charged with governance or the appropriate representative of senior management\\]:\n\nScope\n\nYou have requested that we audit the financial report of \\[name of entity\\], which comprises the balance sheet as at 30 June 20XX, and the income statement, statement of changes in equity and cash flow statement for the year then ended, a summary of significant accounting policies, other explanatory notes and the directors’ declaration. We are pleased to confirm our acceptance and our understanding of this engagement by means of this letter. Our audit will be conducted with the objective of our expressing an opinion on the financial report.\n\nWe will conduct our audit in accordance with Australian Auditing Standards. Those Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing audit procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. An audit also includes evaluating the appropriateness of the financial reporting framework, accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial report.\n\nBecause of the test nature and other inherent limitations of an audit, together with the inherent limitations of any accounting and internal control system, there is an unavoidable risk that even some material misstatements may remain undiscovered.\n\nIn making our risk assessments, we consider internal control relevant to the entity’s preparation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. However, we expect to provide you with a separate letter concerning any material weaknesses in the design or implementation of internal control over financial reporting that come to our attention during the audit of the financial report.[\\[2\\]](#_ftn2)\n\nWe take this opportunity to remind you that the responsibility for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards[\\[3\\]](#_ftn3) (including the Australian Accounting Interpretations) and the Corporations Act 2001 is that of \\[the directors, those charged with governance or insert title\\]. Our auditor’s report will explain that \\[the directors, those charged with governance or insert title\\] are responsible for the preparation and the fair presentation of the financial report in accordance with the applicable financial reporting framework and this responsibility includes:\n\n-   establishing and maintaining internal controls relevant to the preparation of a financial report that is free from misstatement, whether due to fraud or error;\n-   selecting and applying appropriate accounting policies; and\n-   making accounting estimates that are reasonable in the circumstances.\n\nAs part of our audit process, we will request from management written confirmation concerning representations made to us in connection with the audit.\n\nOther Matters under the Corporations Act 2001\n\nIndependence\n\nWe confirm that, to the best of our knowledge and belief, we currently meet the independence requirements of the Corporations Act 2001 in relation to the audit of the financial report. In conducting our audit of the financial report, should we become aware that we have contravened the independence requirements of the Corporations Act 2001, we shall notify you on a timely basis. As part of our audit process, we shall also provide you with a written independence declaration as required by the Corporations Act 2001.\n\nThe Corporations Act 2001 includes specific restrictions on the employment relationships that can exist between the audited entity and its auditors. To assist us in meeting the independence requirements of the Corporations Act 2001, and to the extent permitted by law and regulation, we request you discuss with us:\n\n-   the provision of services offered to you by \\[insert firm name\\] prior to engaging or accepting the service; and\n-   the prospective employment opportunities of any current or former partner or professional employee of \\[insert firm name\\] prior to the commencement of formal employment discussions with the current or former partner or professional employee.\n\nAnnual General Meetings\n\nThe Corporations Act 2001 provides that shareholders can submit written questions to the auditor before an Annual General Meeting provided that they relate to the auditor’s report or the conduct of the audit. To assist us in meeting this requirement in the Corporations Act 2001 relating to Annual General Meetings, we request you provide to us written questions submitted to you by shareholders as soon as practicable after the question(s) is received and no later than five business days before the Annual General Meeting, regardless of whether you believe them to be irrelevant.\n\nPresentation of Audited Financial Report on the Internet\n\nIt is our understanding that the entity intends to publish a hard copy of the audited financial report and auditor’s report for members, and to electronically present the audited financial report and auditor’s report on its internet web site. When information is presented electronically on a web site, the security and controls over information on the web site should be addressed by the entity to maintain the integrity of the data presented. The examination of the controls over the electronic presentation of audited financial information on the entity’s web site is beyond the scope of the audit of the financial report. Responsibility for the electronic presentation of the financial report on the entity’s web site is that of the governing body of the entity.\n\n  \nFees\n\nWe look forward to full cooperation from your staff and we trust that they will make available to us whatever records, documentation and other information we request in connection with our audit.\n\n\\[Insert additional information here regarding fee arrangements and billings, as appropriate.\\]\n\nPlease sign and return the attached copy of this letter to indicate that it is in accordance with your understanding of the arrangements for our audit of the financial report.\n\nYours faithfully,\n\n(signed)\n\n...............................\n\nName and Title\n\nDate\n\nAcknowledged on behalf of \\[entity\\] by (signed)\n\n...............................\n\nName and Title\n\nDate","sortOrder":19}],"analysis":{"kimi_summary":{"_metrics":{"model":"kimi-k2.5","source":"moonshot-realtime","completionTokens":3255},"content_quality":"ok","complexity_score":4,"scope_assessment":{"changed":false,"description":"The standard maintains its original focus on establishing and documenting terms of audit engagements. The 2007 amendment (ASA 2007-1) updated only the example engagement letter in Appendix 1 without altering the substantive scope or adding new mandatory requirements."},"complexity_factors":["Mandatory requirements distinguished from explanatory guidance via bold-type paragraph formatting throughout","Cross-references to other Auditing Standards (ASA 200) and Part 2M.3 of the Corporations Act 2001","Multi-layered conditional logic for accepting or rejecting changes in engagement terms (paragraphs 20-29)","Specific statutory disclosure requirements for auditor independence under the Corporations Act 2001","Template placeholders in Appendix 1 example letter requiring customization for specific entities"],"plain_english_summary":"ASA 210 requires auditors and clients to set out audit engagement terms in writing so both sides understand the audit’s objective, scope, responsibilities and limits. It applies to company auditors under the Corporations Act, directors/audit committees, and any entity engaging an auditor.\n\nBy mandating clear, written engagements and independence confirmations—and limiting shifts to weaker engagements when problems arise—the standard protects audit quality, prevents opinion-shopping, and clarifies liability and expectations for investors, regulators and clients."},"flash_summary":{"complexity_score":3,"scope_assessment":{"changed":true,"description":"The compilation incorporates amendments up to 27 June 2007. Appendix 1 (example engagement letter) was amended by ASA 2007-1 (see Table of Amendments). The compilation also notes operative-date changes for amended paragraphs (Compilation Details). Substantively, this AU standard mandates written recording of agreed terms and legislative minimum terms (paragraphs 5, 18, 25), a difference from ISA 210 noted in paragraph 30."},"complexity_factors":["Mandatory written terms and confirmations (paragraphs 5, 18, 25) — creates a clear documentation burden.","Interaction with Corporations Act requirements, including independence statements and legislative minimum terms (application and paragraphs 1, 5, 13-14).","Professional judgement required when an entity requests a change to a lower level of assurance and when assessing \"reasonable justification\" (paragraphs 20–27).","Obligations and discretion to withdraw and possibly report circumstances to governance or shareholders (paragraphs 28–29).","Group/component audit decisions and whether to issue separate or single engagement letters (paragraphs 15–17).","Recurring-audit review triggers and when to reissue engagement letters (paragraphs 18–19).","Cross-references to other Auditing Standards (e.g. ASA 200) and conformity notes with ISA 210 (paragraphs 10, 30) — increases interpretive complexity.","Compilation and amendment history (Compilation Details, Table of Amendments) — practitioners must note operative dates and amended Appendix 1."],"plain_english_summary":"This standard requires auditors to agree and record in writing the terms of an audit engagement and to confirm any change in those terms in writing. It applies to audits of financial reports under the Corporations Act and to other financial-report audits. The stated purpose is to reduce misunderstandings and set out responsibilities; it therefore imposes documentation, independence statements where the Corporations Act applies, procedures for reduced-assurance requests, and withdrawal/ reporting obligations on auditors."}},"importantCases":[],"_links":{"self":"/api/acts/asa-210-terms-of-audit-engagements-april-2006","history":"/api/acts/asa-210-terms-of-audit-engagements-april-2006/history","analysis":"/api/acts/asa-210-terms-of-audit-engagements-april-2006/analysis","conflicts":"/api/acts/asa-210-terms-of-audit-engagements-april-2006/conflicts","importantCases":"/api/acts/asa-210-terms-of-audit-engagements-april-2006/important-cases","documents":"/api/acts/asa-210-terms-of-audit-engagements-april-2006/documents"}}