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CA Final · Advanced Auditing, Assurance and Professional Ethics · Materiality, Risk Assessment and Internal Control

Anand Auto Ltd has automated its payroll and inventory costing. During planning, the auditor considers whether to rely on manual or automated controls for a large one-off transaction, the disposal of an entire business division. Which view is consistent with SA 315?

Manual elements of control may be more suitable for large, unusual or non-recurring transactions such as a division disposal. SA 315 notes manual controls fit where judgment and discretion are required, while automated controls suit consistent processing of high volumes under predefined rules.

  1. AManual elements of control may be more suitable for large, unusual or non-recurring transactionsCorrect
  2. BAutomated controls are always more suitable for non-recurring transactions because they avoid human error
  3. CControls are irrelevant to non-recurring transactions
  4. DOnly automated controls can be evaluated by the auditor

Explanation

SA 315 states that manual elements may be more suitable where judgment and discretion are required, including large, unusual or non-recurring transactions. Automated controls excel at consistent application of predefined rules to high volumes. Option B reverses this guidance.

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