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

CA Nikhil is planning the audit of Deccan Infra Ltd, which holds unquoted investments measured at fair value using a complex model. The engagement team lacks valuation skills. Which action is most consistent with SA 540 and SA 300?

The auditor should determine the resources needed, involving specialists with valuation skills if necessary, and the engagement partner must be satisfied the team collectively has the capabilities, competence and time. This is a planning responsibility under SA 540 read with SA 300 and SA 220.

  1. ARely on management's valuation without further involvement since the model is management's responsibility
  2. BAscertain the resources needed, including involving those with specialised skills or knowledge if necessary, and ensure the team collectively has the appropriate capabilities, competence and timeCorrect
  3. CModify the audit report in the planning stage for lack of skills in the team
  4. DDelay the decision on specialised skills until the completion stage

Explanation

SA 540 notes that in planning the auditor ascertains the nature, timing and extent of resources necessary, which may include 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. Deferring or modifying the report does not address this planning duty.

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