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CA Final · Advanced Auditing, Assurance and Professional Ethics · General Auditing Principles and Auditors Responsibilities

Arjun & Co. audits Veda Pharma Ltd, which outsources payroll processing to a service organisation. The service auditor who issued a report on the service organisation is a member of the Institute of Chartered Accountants of India. In assessing whether to use that report as evidence, what does SA 402 as modified in India require regarding the service auditor's professional competence?

Under SA 402 as modified in India, the user auditor must assess the service auditor's professional competence except where the service auditor is also a member of the Institute of Chartered Accountants of India. Because the service auditor here is a member, the competence assessment is not required.

  1. AThe assessment of professional competence is required in every case without exception
  2. BThe assessment of professional competence is required except where the service auditor is also a member of the Institute of Chartered Accountants of IndiaCorrect
  3. CNo assessment of competence or independence is ever required
  4. DThe assessment is required only for public sector entities

Explanation

The modification to ISA 402 states that the corresponding paragraphs of SA 402 require assessment of professional competence except where the service auditor is also a member of ICAI. Since the service auditor here is an ICAI member, that assessment is not required. Option A ignores the Indian modification.

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