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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 Rohit accumulates misstatements. Individually they are small, but the aggregate of misstatements accumulated so far approaches the materiality determined under SA 320. What should he do under SA 450?

He should determine whether the overall audit strategy and audit plan need to be revised, because SA 450 requires this when the aggregate of accumulated misstatements approaches materiality. Adjusting materiality to absorb the misstatements or issuing an immediate opinion is not the prescribed response.

  1. AIgnore them because each misstatement is individually clearly trivial
  2. BDetermine whether the overall audit strategy and audit plan need to be revisedCorrect
  3. CImmediately issue an adverse opinion
  4. DIncrease materiality so that the aggregate falls below the threshold

Explanation

SA 450 requires the auditor to determine whether the overall audit strategy and audit plan need to be revised when the aggregate of accumulated misstatements approaches materiality. Raising materiality merely to avoid the issue is not a permitted response, and an opinion is not formed at this stage.

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