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

CA Tarun is principal auditor of Bharat Infra Ltd. A newly acquired subsidiary operates in an unfamiliar line of business and is audited by another auditor. Tarun has little knowledge of that business. Under SA 600, how does this affect his acceptance as principal auditor?

His limited knowledge matters because SA 600 lists the principal auditor's degree of knowledge of the components' business as a factor in accepting the role. It does not automatically disqualify him, but it bears on whether additional procedures give him significant participation in the other auditor's work.

  1. AIt is irrelevant, since only the materiality of his own portion is considered
  2. BIt is relevant because his degree of knowledge of the components' business is a matter to consider, and its weakness bears on whether he has significant participation through additional proceduresCorrect
  3. CIt automatically disqualifies him from acting as principal auditor
  4. DIt is relevant only after he has signed the audit report

Explanation

SA 600 lists the principal auditor's degree of knowledge of the business of the components as a matter to consider. Limited knowledge does not automatically disqualify him, but it weighs against his participation being sufficient. It points to the need for additional procedures to achieve significant participation.

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