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CA Intermediate · Auditing and Ethics · Audit Strategy, Audit Planning and Audit Programme

Anita, an auditor of Bharat Auto Components Ltd., is preparing the audit plan. She notes that the client has recently implemented a new ERP system mid-year, replacing a manual inventory system. Which response best reflects planning requirements under the Standards on Auditing?

A mid-year ERP implementation is a significant planning factor. The auditor should reflect it in the overall strategy, consider involving IT specialists, and adjust the nature, timing and extent of procedures and resources. Assuming computerised records are automatically reliable, or deferring the matter, would be inappropriate.

  1. AIgnore the change as the opening balances were audited by the predecessor
  2. BTreat it as a significant factor in the overall audit strategy, consider the need for IT specialist skills, and adjust the nature, timing and extent of procedures and resourcesCorrect
  3. CReduce the sample size for inventory since computerised records are always more reliable
  4. DDefer consideration of the change until the audit report is being drafted

Explanation

SA 300 requires the strategy to consider significant factors such as major changes in IT systems, and the auditor must decide on resources, including specialists. The new ERP raises risk, so procedures may need to be expanded. Option C wrongly assumes computerisation always reduces risk.

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