ACCA Strategic Professional · Advanced Audit and Assurance (International) · Planning, materiality and assessing the risk of material misstatement

Brightwater Telecom Ltd has recently acquired a competitor and introduced a new billing system. The audit team is documenting its understanding of the entity. Which of these changes is most directly relevant to the auditor's understanding of the entity's business model and accounting policies under ISA 315 (Revised 2019)?

Both the acquisition and the new billing system are relevant, because ISA 315 requires the auditor to understand changes in the entity's structure, business model and IT environment and how they affect accounting policies and risks of material misstatement. Such changes are considered at planning, not just at completion.

1. AThe acquisition and system change, because changes in the entity, its structure and systems may affect risks of material misstatement and the selection or application of accounting policiesCorrect
2. BNeither, because changes during the year are only considered at the completion stage
3. COnly the acquisition, because IT changes are outside the scope of the auditor's understanding
4. DOnly the billing system, because acquisitions are covered by group audit rules alone