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CMA Intermediate · Corporate Accounting and Auditing · Audit Engagement, Audit Program, Audit Documentation and Audit Evidence

During the audit of a manufacturing company, substantive procedures on sales produce results that contradict the evidence from the earlier tests of controls on the sales process. As per SA 300, what is the appropriate planning response?

The auditor should modify the overall audit strategy and audit plan, and the planned nature, timing and extent of further procedures, based on revised assessed risks. SA 300 recognises that substantive evidence contradicting tests of controls is a reason to change the original planning decisions.

  1. AContinue with the original audit plan unchanged, since the plan was approved at the start
  2. BModify the overall audit strategy and audit plan, and the planned nature, timing and extent of further procedures, based on the revised assessed risksCorrect
  3. CWithdraw from the engagement immediately
  4. DRecord the contradiction but leave the planned procedures unchanged until the next year's audit

Explanation

SA 300 states that unexpected events, changed conditions or audit evidence from procedures may require the auditor to modify the overall audit strategy and audit plan. Substantive evidence contradicting tests of controls is the example given. Keeping the plan unchanged ignores the revised risk assessment.

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