CA Intermediate · Auditing and Ethics · Audit of Banks
CA Meera is a statutory central auditor of a public sector bank. For a large branch that she does not visit, the branch auditor's report is received with a qualification about under-provisioning on an advance of Rs 40 lakh. Which is the most appropriate response by the central auditor?
The central auditor must consider the branch auditor's qualification and decide its effect on the bank's overall financial statements and on her own audit report, using materiality and professional judgement. She cannot ignore it, nor override it without procedures, and need not withdraw from the engagement.
- AIgnore the qualification because only branch auditors are responsible for branch advances
- BConsider the branch auditor's report, and decide its effect on the bank's financial statements and on her own report, applying professional judgement on materialityCorrect
- CReplace the branch auditor's report with her own opinion without any further procedure
- DWithdraw from the engagement because a qualification has been reported
Explanation
The central auditor must consider the reports of branch auditors and determine how they affect her report on the bank's financial statements. She uses judgement on materiality and the need for modification. She cannot ignore the report, and a qualification does not require resignation.
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