Skip to content

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

CA Nisha was appointed auditor of Bharat Steels Ltd. in April for the year ending 31 March. In September, after fieldwork began, she learnt that the company had entered into a significant contract with a related party that was not known to her at planning stage. This raises risks she had not anticipated in her audit plan. Which is the most appropriate response under SA 300?

CA Nisha should update the overall audit strategy and audit plan, revising the nature, timing and extent of procedures to respond to the new related-party risk, and document the significant changes with reasons. SA 300 requires such updating whenever circumstances change during the audit.

  1. AContinue with the original plan because changes after the planning stage are not permitted
  2. BModify the overall audit strategy and audit plan as necessary, including the nature, timing and extent of planned procedures, and document the significant changes and reasonsCorrect
  3. CWithdraw from the engagement as the risk was not identified at the planning stage
  4. DReport the matter in the audit report only and leave the audit plan unchanged

Explanation

SA 300 requires the auditor to update and change the overall audit strategy and audit plan as necessary during the course of the audit, and to document significant changes and the reasons for them. Withdrawal is not automatically required, and merely reporting without altering procedures would not address the new risk. Keeping the original plan ignores the new risk of material misstatement relating to related parties.

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