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CA Final · Advanced Auditing, Assurance and Professional Ethics · Audit Planning, Strategy and Execution

During the audit of Bharat Components Ltd, CA Rohan accumulates misstatements and finds that several arose from the same weakness in the cut-off process for dispatches. Individually they are small, but their nature suggests more cut-off errors may exist that, when aggregated with those accumulated, could be material. What should he do under SA 450?

He should determine whether the overall audit strategy and audit plan need to be revised. Because the nature and circumstances of the cut-off errors indicate other misstatements may exist that could be material in aggregate, SA 450 requires reconsideration of planning rather than only correcting the identified items.

  1. AIgnore them because each is below the clearly trivial threshold
  2. BDetermine whether the overall audit strategy and audit plan need to be revisedCorrect
  3. CImmediately issue a qualified opinion on the financial statements
  4. DRequest management to correct only the identified misstatements and make no change to planning

Explanation

SA 450 requires the auditor to determine whether the overall audit strategy and audit plan need revision if the nature of misstatements and circumstances indicate other misstatements may exist that could be material when aggregated. Option D is wrong as correcting only the identified items ignores the likelihood of undetected ones. Opinion modification is premature at this stage.

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