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

CA Ria is auditor of Sundaram Textiles Ltd. She personally audits only a small portion of the company's financial information, has little knowledge of the business of the components audited by other auditors, and sees a high risk of material misstatement in those components. What is the appropriate conclusion?

She should consider whether her own participation is sufficient to act as principal auditor. She must weigh the materiality of her portion, her knowledge of the components' business, the risk of misstatement in the other auditors' components, and whether additional procedures give her significant participation.

  1. AShe is the principal auditor automatically because she holds the company's appointment
  2. BShe should decide only on the basis of the other auditors' professional reputation
  3. CShe should consider whether her own participation is sufficient to act as principal auditor, taking into account materiality of her portion, knowledge of the components' business, the risk of misstatement and additional procedures giving significant participationCorrect
  4. DShe should decide only on the basis of the materiality of her own portion and ignore the other factors

Explanation

The Standard requires her to consider whether her own participation is sufficient, using four matters together. Her facts of small portion, low knowledge and high risk weigh against sufficiency unless additional procedures give significant participation. Appointment alone or materiality alone does not settle the question.

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