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

CA Tanmay is auditing Orion Logistics Ltd. After the audit plan was finalised, a major customer went into insolvency during the audit, leading to a material increase in the assessed risk of misstatement for trade receivables. The planned procedures were designed for the earlier risk level. What is the auditor's correct response under SA 300?

The auditor must revise the overall audit strategy and audit plan as necessary when circumstances change, such as increased receivables risk, and document the significant changes and their reasons. Planning is iterative, so sticking to the original plan or hiding changes is incorrect.

  1. AContinue with the original plan as plans once approved cannot be altered
  2. BUpdate and change the overall audit strategy and audit plan as necessary during the course of the audit, and document the significant changes and reasonsCorrect
  3. CChange the procedures but avoid documenting it to prevent confusion with the original plan
  4. DWithdraw from the engagement immediately as the plan has failed

Explanation

SA 300 requires the auditor to update and change the overall strategy and audit plan as necessary during the audit, because planning is continual and iterative. Significant changes and reasons must be documented as per SA 230. Option A is wrong because a plan is not fixed; option C violates documentation requirements.

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