AU-C Section 210.14-17: Change in Terms of Engagement

AU-C Section 210.14-17 says:

".14 The auditor should not agree to a change in the terms of the audit engagement when no reasonable justification for doing so exists. (Ref: par. .A35– .A37)

.15 If, prior to completing the audit engagement, the auditor is requested to change the audit engagement to an engagement for which the auditor obtains a lower level of assurance, the auditor should determine whether reasonable justification for doing so exists. (Ref: par. .A38–.A39)

.16 If the terms of the audit engagement are changed, the auditor and management should agree on and document the new terms of the engagement in an engagement letter or other suitable form of written agreement.

.17 If the auditor concludes that no reasonable justification for a change of the terms of the audit engagement exists and is not permitted by management to continue the original audit engagement, the auditor should

1.  withdraw from the audit engagement when possible under applicable law or regulation,
2. communicate the circumstances to those charged with governance, and
3. determine whether any obligation, either legal, contractual, or otherwise, exists to report the circumstances to other parties, such as owners, or regulators."

Management might request a change in terms of an audit engagement for the following reasons:

• a change in circumstances affecting the need for the service
• a misunderstanding about the nature of an audit as originally requested
• a restriction on the scope of the audit engagement 

The Auditor should consider the implications of a change to terms of the engagement and particularly the restriction on the scope of the audit.  The above listed reasons might be acceptable, but the request to reduce the scope of the audit might not be acceptable if it's due to the Auditor finding misstatements or not being able to obtain sufficient appropriate audit evidence.

If the Auditor is requested to reduce the level of assurance of the engagement (e.g., from an audit to a review), the Auditor should assess the reasons for doing so.  If the Auditor accepts the change, the Auditor should narrow his work and documentation and report to the terms of the new engagement.  For example, in the final report, the Auditor should not make reference to:

• the original audit engagement
• any procedures that were performed in the original engagement

https://www.aicpa.org/content/dam/aicpa/research/standards/auditattest/downloadabledocuments/au-c-00210.pdf