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

During the audit of Himalaya Foods Ltd, CA Meera accumulates misstatements. Materiality is Rs 50 lakh and the aggregate of uncorrected misstatements found so far is Rs 46 lakh, with several audit areas still untested. What should she do under SA 450?

She should determine whether the overall audit strategy and audit plan need revision. SA 450 requires this when accumulated misstatements approach materiality, and Rs 46 lakh against Rs 50 lakh clearly approaches it, so remaining untested areas may need more work.

  1. AContinue with the existing strategy because the aggregate is still below materiality
  2. BDetermine whether the overall audit strategy and audit plan need to be revised because the aggregate approaches materialityCorrect
  3. CIncrease materiality to Rs 60 lakh so that the aggregate falls well below it
  4. DStop accumulating misstatements below Rs 50 lakh as they are trivial

Explanation

SA 450 requires the auditor to determine whether the strategy and plan need revision if the aggregate of misstatements accumulated approaches materiality determined under SA 320. At Rs 46 lakh against Rs 50 lakh this condition is met. Option A wrongly waits until materiality is exceeded, and Option C manipulates materiality without any basis.

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