SA 210 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
SA 210 says an auditor should accept or continue an audit only when the basis for it has been agreed in writing. It sets two preconditions, requires an engagement letter with specified content, and deals with repeat audits and requests to change the terms.
SA 210, as effective for audits of financial statements for periods beginning on or after 1 April 2010, applies to every audit. ICAI may revise standards, so check icai.org for the current text. For how SA 210 fits among the standards see our full list of SAs.
Before accepting an audit, the auditor must establish two preconditions: management is using an acceptable financial reporting framework, and management acknowledges its responsibilities for the statements, internal control and access to information and people. The terms are then recorded in an engagement letter covering objective and scope, both sides' responsibilities, the framework and the expected report. If the preconditions are missing, the auditor generally declines unless law requires the audit.
Scope and objective (paragraphs 1-5)
Paragraph 1 says SA 210 covers agreeing the terms of the audit with management and, where appropriate, those charged with governance, and establishing the preconditions that rest with them. The parts of acceptance within the auditor's control, such as ethics and capacity, sit in SA 220; see our SA 220 article. Paragraph 5 says "management" in this SA includes those charged with governance where appropriate.
The objective (paragraph 3) is to accept or continue an engagement only when the basis has been agreed, by establishing the preconditions and confirming a common understanding of the terms.
The two preconditions (paragraph 6)
| Precondition | What the auditor does |
|---|---|
| Acceptable financial reporting framework | Determines whether the framework used to prepare the statements is acceptable (6(a)). For general purpose statements, framework standards from an authorised body are presumed acceptable; the application material gives ICAI Accounting Standards and the notified Companies Accounting Standards Rules among examples (A8) |
| Management's acknowledged responsibilities | Obtains management's agreement that it understands its responsibility (6(b)) for preparing the statements under the framework, including fair presentation where relevant; for internal control it determines is necessary to prepare statements not materially misstated; and to give access to all relevant information, additional information requested, and unrestricted access to people |
On internal control, A16 stresses that an audit is not a substitute for management maintaining it, and that the agreement does not mean the auditor will find the controls effective. A18 points out that, for companies, directors have duties on internal financial controls and that the illustrative engagement letter for companies describes these. A12 reminds management that written representations will be expected; see SA 580 on representations.
When things go wrong at acceptance (paragraphs 7-8)
If management imposes a scope limitation that the auditor believes will lead to a disclaimer of opinion, the auditor does not accept it as an audit, unless law requires (paragraph 7). If a precondition is absent the auditor discusses it with management, and, unless required by law, does not accept the engagement where the framework is unacceptable (apart from the case in paragraph 19) or where management has not given the agreement in paragraph 6(b) (paragraph 8).
Agreeing and recording the terms (paragraphs 9-12)
The terms are recorded in an engagement letter or other suitable written agreement and include (paragraph 10):
- the objective and scope of the audit;
- the auditor's responsibilities;
- management's responsibilities;
- identification of the applicable financial reporting framework; and
- reference to the expected form and content of any reports, with a statement that a report may differ from the expected form in some circumstances.
Where law prescribes the terms in enough detail, the letter need record only that the law applies and that management acknowledges its responsibilities (paragraph 11). If law sets out management's responsibilities in a way that is equivalent in effect, the letter may use the law's wording; otherwise paragraph 6(b) wording is used (paragraph 12).
The application material says the auditor should send the letter before the audit starts (A22), and suggests extras, such as references to key audit matters, inherent limits of an audit and of internal control, the audit team, expected representations, timing of draft statements, informing the auditor of events after the report date, basis of billing, acknowledgement of receipt, and the possibility of peer review under the Chartered Accountants Act, 1949 (A23). It also lists optional points where relevant, such as other auditors and experts, internal auditors, predecessor auditor arrangements, limits on liability and obligations to provide working papers (A25). Appendix 1 of the SA gives illustrative letters, including one for a Companies Act audit; the headings cover the objective and scope, the auditor's responsibilities, management's responsibilities, reports and acknowledgement. Draft your own letter from the engagement facts and do not copy the illustration blindly.
For the tax audit angle, see our posts on the appointment letter and engagement terms for a tax audit and the engagement letter and scope acknowledgement. For the statutory appointment under the Companies Act, see the auditor appointment letter format.
Recurring audits (paragraph 13)
The auditor assesses each year whether the terms need revising or the entity needs a reminder. The auditor may choose not to send a new letter every period, but A29 lists triggers for revisiting: signs the entity misunderstands the audit, special terms, a change of senior management, a significant change in ownership or in the nature or size of the business, a change in legal requirements, a change in the framework or a change in other reporting requirements.
Changing the terms (paragraphs 14-17)
The auditor does not agree to a change without reasonable justification (paragraph 14). A change in circumstances or a misunderstanding about the service may be reasonable (A31); a change that looks aimed at covering up incomplete or unsatisfactory information is not. A32 gives the example of receivables evidence not being obtainable and the entity asking to switch to a review to avoid a qualified opinion or disclaimer. Before moving to a lower level of assurance, the auditor considers whether there is reasonable justification (paragraph 15), records the new terms in writing (paragraph 16), and if the original audit cannot continue, withdraws where law allows and considers any duty to report to those charged with governance, owners or regulators (paragraph 17).
Special acceptance situations (paragraphs 18-21)
- Standards supplemented by law. If law adds to the accounting standards and there is a conflict, the auditor discusses with management whether extra disclosures or an amended description of the framework can resolve it; otherwise, the auditor considers modifying the opinion (paragraph 18).
- A framework that would be unacceptable but is prescribed by law. The auditor accepts only if management agrees to additional disclosures, and the terms recognise an Emphasis of Matter paragraph and, in some cases, an opinion without the phrases "present fairly" or "true and fair view" (paragraphs 19-20).
- A prescribed report layout that differs significantly from the SAs. If extra explanation cannot prevent users misunderstanding the assurance, the auditor does not accept unless law requires, and then the report does not refer to SAs (paragraph 21).
Illustrative example
Sunrise Packaging Pvt Ltd, an invented company, asks Gupta & Co. to audit its financial statements. The partner confirms the company reports under the Companies (Accounting Standards) Rules, obtains the directors' acknowledgement of their duties on preparation, internal financial controls and access, and issues a letter covering the five contents. In the second year a new CFO joins and ownership changes by a share transfer, so the partner reissues the letter. Midway through year three, the company asks to convert the audit into a review because stock records are incomplete; the partner declines, because the request relates to unsatisfactory information.
Need help with audit readiness?
If you want your records and responsibilities clear before the engagement letter is signed, TaxClue's books of accounts compliance team can help you prepare. Companies preparing for their first audit can also use our books of accounts compliance support to check that records are complete.
Key takeaways
- The two preconditions are an acceptable framework and management's acknowledged responsibilities.
- The engagement letter covers scope, both sides' duties, the framework and the expected report.
- Recurring audits need a yearly assessment of whether the letter should be updated.
- A change in terms needs reasonable justification; avoiding a modified opinion is not one.
- Where law prescribes the terms in detail, the letter can be short.
Read next
- SA 200: overall objectives of the auditor
- SA 300: planning an audit
- SA 580: written representations
- Appointment letter and engagement terms for a tax audit
Disclaimer: Based on the Standards on Auditing and quality standards issued by the Institute of Chartered Accountants of India, in the versions named in the article, and ICAI's announcement of 31 March 2026 on SQM 1 and SQM 2, as consulted on 3 October 2026. ICAI revises standards from time to time; check the current text and effective dates on icai.org. This article is general information, not legal advice; check the official text before acting.