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CA Final · Advanced Auditing, Assurance and Professional Ethics · Audit Evidence

During the audit of Himalaya Foods Ltd, CA Nisha asks the plant manager whether the internal control over goods dispatch operated effectively throughout the year. The manager confirms in writing and orally that it did. Nisha performs no other procedure on this control. What is the correct conclusion?

The evidence is insufficient. Inquiry alone ordinarily does not give sufficient audit evidence of the operating effectiveness of controls. The auditor should combine inquiry with other procedures such as inspection, observation or reperformance, and a written statement from the manager does not remove that need.

  1. AThe evidence is sufficient because the manager is the person responsible for the control
  2. BThe evidence is sufficient because a written reply is documentary evidence
  3. CThe evidence is insufficient, because inquiry alone ordinarily does not provide sufficient evidence of the operating effectiveness of controlsCorrect
  4. DThe evidence is sufficient provided the manager is a qualified person

Explanation

Audit procedures include inspection, observation, confirmation, recalculation, reperformance and analytical procedures, usually in combination with inquiry. Inquiry alone ordinarily does not provide sufficient audit evidence of the absence of material misstatement or of operating effectiveness of controls. A written reply from management does not change this.

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