CA Final · Advanced Auditing, Assurance and Professional Ethics · Related Services
A bank asks Rao & Co., the statutory auditors of Godavari Metals Ltd., to perform specified procedures on the company's receivables ageing schedule and report what was found, with the bank drawing its own conclusions. The firm asks whether the engagement can be accepted although it is not required to be the entity's auditor. What is the correct position under SRS 4400?
SRS 4400 uses the term auditor for agreed-upon procedures services, but this does not imply that the person performing the engagement must be the auditor of the entity's financial statements. Any suitably qualified practitioner may undertake it, so the statutory auditor is not the only person eligible.
- AIt can be undertaken only by a person who is the statutory auditor of the entity
- BIt cannot be undertaken because agreed-upon procedures are not permitted for a single schedule
- CThe term auditor is used in SRS 4400 for such services, but this does not imply that the person performing the related service must be the auditor of the entity's financial statementsCorrect
- DThe engagement is converted into an audit once the bank accepts the findings
Explanation
The footnote to SRS 4400 clarifies that the term auditor is used when describing agreed-upon procedures services, but this is not intended to imply that the person performing the related service need necessarily be the entity's auditor. So there is no restriction to the statutory auditor. The other options invent restrictions or conversions that the standard does not contain.
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