Question

Which of the following factors most likely would cause an auditor to decline a new audit engagement?

The close proximity to the end of the entity’s fiscal year.

An inadequate understanding of the entity’s internal control.

Failure of management to satisfy the preconditions for an audit.

An inability to perform preliminary analytical procedures before assessing control risk.

Answer 1

Failure of management to satisfy the preconditions for an audit.

The auditor should agree with management or those charged with governance upon the terms of engagement. Auditor will accept the audit only if

1) Preconditions for an audit are present such as use of acceptable accounting framework by the client & premise of audit relating to fundamental responsibilities of management and those charged with governance.

2) Common understanding on terms have been reached.

Thanks,

let me know if you have any doubts.