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CS Professional · Compliance Management, Audit and Due Diligence · Audit Process and Documentation

Auditor Meera is auditing Bharat Components Ltd, whose sales are processed through a highly automated system with almost no manual intervention. She concludes that substantive procedures alone cannot give sufficient appropriate audit evidence on the completeness of recorded sales. What does SA 315 require next?

She must obtain an understanding of the entity's controls over that risk. SA 315 says that where substantive procedures alone cannot provide sufficient appropriate evidence, such as highly automated routine transactions, the controls over those risks are relevant to the audit.

  1. AShe must obtain an understanding of the entity's controls over that risk, as they are relevant to the auditCorrect
  2. BShe may ignore controls and increase sample sizes of substantive tests
  3. CShe must withdraw from the engagement
  4. DShe must rely solely on management's written representation

Explanation

For risks where substantive procedures alone are not sufficient, SA 315 says the entity's controls over such risks are relevant and the auditor shall obtain an understanding of them. Increasing substantive samples ignores that requirement, which is the key distractor.

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