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CS Professional · Compliance Management, Audit and Due Diligence · Audit Process and Documentation

Ganga Retail Ltd uses an ERP that automatically posts sales invoices. Store accountants review the daily exception report generated by the ERP and resolve flagged items. Applying SA 315, how is this arrangement best characterised?

It is a mix of automated controls and manual controls that use IT-generated information and handle exceptions. SA 315 says such manual and automated characteristics are relevant to the auditor's risk assessment and to the further audit procedures designed in response.

  1. AA mix of automated controls and manual controls that use IT-produced information and handle exceptions, which the auditor considers in risk assessmentCorrect
  2. BPurely a manual control because humans review the report
  3. CPurely an automated control because the ERP produces the report
  4. DNot relevant to the auditor's risk assessment because it involves IT

Explanation

Controls in IT systems combine automated controls and manual controls. Manual controls may use information produced by IT or be limited to monitoring the functioning of IT and handling exceptions. The characteristics of manual and automated elements are relevant to risk assessment and the further procedures. So it is neither purely manual nor purely automated, and is not irrelevant.

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