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

At Sundaram Engineering Pvt Ltd, the auditor is evaluating controls over a large, unusual one-off sale of a division. The existing automated controls were designed for routine sales. As per SA 315, which type of control is generally more suitable here?

Manual elements of control are generally more suitable, because SA 315 says judgment and discretion are needed for large, unusual or non-recurring transactions, and for circumstances outside the scope of existing automated controls. Automated controls suit routine, predefined processing.

  1. AManual elements of control, since judgment and discretion are needed for large, unusual or non-recurring transactionsCorrect
  2. BAutomated controls only, since they apply predefined rules without bias
  3. CNo control is needed because the transaction is non-recurring
  4. DOnly controls operated by the external auditor

Explanation

SA 315 says manual elements may be more suitable where judgment and discretion are required, including large, unusual or non-recurring transactions and changing circumstances outside the scope of an existing automated control. Option B is wrong because automated controls are suited to routine, predictable processing.

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