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CS Professional · Compliance Management, Audit and Due Diligence · Audit Process and Documentation

A firm of auditors is auditing Kaveri Agro Ltd, where sales invoicing is highly automated with almost no manual intervention. The auditor concludes that substantive procedures alone cannot give sufficient appropriate audit evidence on the completeness of recorded sales. What does SA 315 require next?

The auditor must obtain an understanding of the entity's controls over that risk. SA 315 treats those controls as relevant when highly automated processing with little manual intervention means substantive procedures alone cannot provide sufficient appropriate audit evidence, so larger substantive samples are not an adequate response.

  1. AObtain an understanding of the entity's controls over that riskCorrect
  2. BIncrease only the sample size of substantive tests of details
  3. CDisclaim an opinion on the financial statements
  4. DDocument the risk but ignore the controls as irrelevant

Explanation

Where substantive procedures alone cannot provide sufficient appropriate evidence, such as for highly automated routine transactions, SA 315 says the entity's controls over such risks are relevant and the auditor shall obtain an understanding of them. Simply enlarging substantive samples ignores that requirement, and a disclaimer is premature.

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