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CA Final · Advanced Auditing, Assurance and Professional Ethics · Digital Auditing & Assurance

A CA firm is engaged to audit Deccan Bank Ltd's core banking system migration. A partner proposes to use a client-provided extraction of loan data for a full-population recalculation of interest, without checking its completeness and accuracy, since the IT department is considered competent. Which action is most consistent with SA 500 and SA 520?

The auditor should verify the completeness and accuracy of the extracted data, for example by reconciling record counts and control totals to the ledger, before using it. Under SA 500, information produced by the entity must be evaluated for reliability; competence of staff or representations alone is insufficient.

  1. AUse the extraction as provided, as competent IT staff make completeness testing unnecessary
  2. BObtain evidence over the completeness and accuracy of the extracted data, for instance by reconciling record counts and control totals to the general ledger, before using it in the analyticsCorrect
  3. CUse the extraction only for analytical review, not for substantive recalculation, and skip validation
  4. DAsk management to sign a representation that the data is complete and treat that as sufficient evidence

Explanation

SA 500 requires the auditor to evaluate the reliability of information used as audit evidence, including its accuracy and completeness. Reconciling counts and control totals to the ledger tests this. A representation letter alone is not sufficient evidence, and analytics on unvalidated data is equally flawed.

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