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CA Final · Advanced Auditing, Assurance and Professional Ethics · Audit Planning, Strategy and Execution

CA Anil is planning the audit of Kiran Infra Ltd, which carries unlisted investments valued using a complex discounted cash flow model with highly subjective inputs. The engagement team has no valuation expertise. During planning, what is the most appropriate action consistent with SA 300, SA 540 and SA 220?

The auditor should ascertain the resources needed in planning, including involving people with specialised valuation skills where needed, and the engagement partner must be satisfied that the team and any external experts collectively have the capabilities, competence and time. Relying solely on management's report or deferring the issue is inappropriate.

  1. ARely on management's valuation report, since valuation is management's responsibility and not an audit matter
  2. BAscertain the resources needed, including involving persons with specialised skills or knowledge, and have the engagement partner be satisfied that the team and any external experts collectively have the competence and time to perform the engagementCorrect
  3. CLimit the audit scope to the disclosures and omit audit procedures on the estimate itself
  4. DPostpone the question of expertise until the completion stage, when the opinion is being formed

Explanation

In planning, the auditor ascertains the nature, timing and extent of resources necessary, which may include involving those with specialised skills or knowledge. SA 220 requires the engagement partner to be satisfied that the team and any external experts collectively have the capabilities, competence and time. Option D is wrong because the need should be addressed in planning and may also arise during the audit.

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