Skip to content

CA Intermediate · Auditing and Ethics · Audit Strategy, Audit Planning and Audit Programme

CA Nisha is auditing Orbit Components Ltd., a manufacturing company, for the second consecutive year. At the planning stage she wishes to rely on prior-year knowledge. Which of the following is the most appropriate approach consistent with SA 300 and SA 315?

The auditor should use prior-year information as an input but first evaluate whether changes in the entity, its environment or its controls leave it relevant. SA 300 and SA 315 support using past experience, yet prohibit relying on it blindly or discarding it entirely, and team continuity is not the criterion.

  1. AUse prior-year information as one input, but evaluate whether changes in the entity, its environment or controls make it still relevant before relying on itCorrect
  2. BRely entirely on the previous year's risk assessment since the auditor is the same
  3. CIgnore prior-year working papers because every year's audit must start afresh
  4. DRely on the prior-year information only if the same engagement team members are assigned

Explanation

Under SA 300, the engagement partner and key team members should consider experience gained on the entity in earlier engagements, and SA 315 requires the auditor to determine whether information from prior periods remains relevant given changes. Blind reliance ignores changes in the business, controls and risks. Ignoring prior knowledge wastes useful information, and team continuity is not the test.

Did you get it right without looking?

One question tells you little. A timed set on Audit Strategy, Audit Planning and Audit Programme shows your real accuracy, how long you take and where you lose marks.

Practise Audit Strategy, Audit Planning and Audit ProgrammeFree diagnostic mock

More Audit Strategy, Audit Planning and Audit Programme questions