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

An auditor of a retail company discovers that, shortly after year-end, ransomware encrypted the company's sales database. Backups restored most data, but about 2% of transactions for the last month of the year could not be recovered and were reconstructed from bank statements by management. Which action is most appropriate?

The auditor should evaluate the impact on completeness and accuracy of the records, test the reconstructed data against external evidence, consider subsequent-event requirements and disclosure, and then decide the effect on the opinion based on materiality. Ignoring the incident or qualifying automatically would both be inappropriate.

  1. ADisregard the incident because it occurred after the reporting date and has no audit relevance
  2. BQualify the report automatically without evaluating the amounts involved
  3. CEvaluate the effect on the completeness and accuracy of records, perform procedures on the reconstructed data, consider events after the reporting period and disclosure, and assess implications for the audit opinionCorrect
  4. DAsk management to delete the reconstructed records to avoid doubts about reliability

Explanation

The auditor must assess whether the reconstructed records are reliable and complete, test them against external evidence, and consider SA 560 and any disclosure. The opinion effect depends on materiality and evidence obtained. Automatic qualification skips this evaluation, and deleting records would be improper.

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