CA Final · Advanced Auditing, Assurance and Professional Ethics · Group Audits
CA Karan is considering appointment as principal auditor of Vishwa Industries Ltd. He audits the portion forming most of the financial information. He has limited knowledge of the business of two small components audited by other auditors. Those components carry a high risk of material misstatement. He plans additional procedures on those audits that would give him significant participation in them. Which conclusion is most consistent with SA 600?
He should weigh all the stated factors together, including the additional procedures, to judge whether his participation is sufficient. SA 600 makes no single factor decisive: a material own portion and planned additional procedures may offset limited knowledge and high risk in small components.
- AHe must decline, because limited knowledge of the components' business alone bars him from acting
- BHe must decline, because high misstatement risk in any component bars him from acting
- CHe may accept on the basis of materiality alone, and the other factors need not be considered
- DHe should weigh all the stated factors together, including the additional procedures, to judge whether his participation is sufficientCorrect
Explanation
SA 600 makes sufficiency of participation a judgement made by considering materiality of his portion, knowledge of the components' business, misstatement risk, and the additional procedures resulting in significant participation. No single factor is decisive. Here the material portion and the planned procedures offset the weaker factors.
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