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CA Final · Advanced Auditing, Assurance and Professional Ethics · Group Audits

CA Meera is asked to be principal auditor of Sundaram Ltd. She would audit only the head office, a small part of the total financial information. Other auditors audit all the remaining components, which carry a high risk of material misstatement. She has little knowledge of the components' business and plans no additional procedures on their audits. What is the appropriate conclusion under SA 600?

Her own participation is unlikely to be sufficient, so she should reconsider acting as principal auditor. She audits only a small portion, has little knowledge of the components, faces high misstatement risk there, and plans no additional procedures, so all four SA 600 considerations weigh against acceptance.

  1. AShe may accept, because SA 600 sets no condition on the principal auditor's own participation
  2. BShe may accept, because the other auditors' components are their own responsibility
  3. CHer own participation is unlikely to be sufficient, so she should reconsider acting as principal auditorCorrect
  4. DShe may accept provided the other auditors' fee is reasonable

Explanation

SA 600 requires the auditor to consider whether his own participation is sufficient. Here the portion she audits is small, her knowledge of the components is low, the misstatement risk is high and no additional procedures are planned. All four factors point to insufficient participation.

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