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

CA Rohan, auditor of Bharat Steels Ltd, is planning the audit and learns that the company has recently implemented a new ERP system that changed its billing and inventory processes midyear. What is the most appropriate planning response?

The auditor should treat the ERP implementation as a significant change affecting risk assessment, reflect it in the strategy and plan, and revise the plan during the audit if needed. Ignoring it, or abandoning consideration of controls, would not respond properly to the new risks it creates.

  1. AIgnore the change because the audit plan was already approved by those charged with governance
  2. BTreat the ERP change as relevant to risk assessment, consider its effect on the audit strategy and plan, and revise the plan if needed during the auditCorrect
  3. CCease all control testing and perform only substantive procedures without considering the ERP
  4. DRefer the matter to the Registrar of Companies before continuing

Explanation

SA 300 requires the auditor to consider significant changes in the entity, including IT systems, when establishing the strategy, and to update the strategy and plan as necessary during the audit. Ignoring the change or dropping all control consideration is not a proper response, and reporting to the Registrar is not a planning step.

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