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

During the audit of Himalaya Pharma Ltd, CA Rohit accumulates misstatements of Rs 18 lakh against a materiality of Rs 20 lakh. The misstatements arose from cut-off errors at several locations, suggesting that more such errors may exist. What should the auditor do under SA 450?

The auditor should determine whether the overall audit strategy and audit plan need to be revised. SA 450 requires this when the nature of misstatements suggests others may exist that could be material in aggregate, or when the aggregate approaches materiality, as in this case.

  1. ADo nothing because the aggregate is still below materiality
  2. BAsk management to correct only the largest misstatement and close the matter
  3. CDetermine whether the overall audit strategy and audit plan need to be revisedCorrect
  4. DImmediately issue a qualified opinion on the cut-off assertion

Explanation

SA 450 requires the auditor to determine whether the strategy and plan need revision if the nature of misstatements indicates others may exist that could be material when aggregated, or if the aggregate approaches materiality. Both conditions apply here. Option 0 is wrong because being below materiality does not remove this requirement when the aggregate approaches it.

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