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

Banyan Foods Pvt Ltd processes thousands of sales invoices daily through an ERP that applies predefined pricing and discount rules. The auditor, CA Meera, is assessing the characteristics of automated controls. Which of the following is a benefit of IT in internal control recognised in SA 315?

IT benefits internal control by consistently applying predefined business rules and performing complex calculations over large volumes of transactions or data. It reduces, but does not eliminate, the risk of circumvention, and manual controls remain suitable where judgment is needed, so the other statements are overstated.

  1. AIt eliminates the need for management to monitor controls
  2. BIt guarantees that no control can ever be circumvented
  3. CIt consistently applies predefined business rules and performs complex calculations on large volumes of transactionsCorrect
  4. DIt makes manual controls unsuitable for every circumstance

Explanation

SA 315 says IT generally benefits internal control by consistently applying predefined business rules and performing complex calculations when processing large volumes of data. The text says IT reduces the risk that controls will be circumvented, not that it removes it entirely. Manual elements stay more suitable for judgment areas.

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