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CA Intermediate · Auditing and Ethics · Audit Strategy, Audit Planning and Audit Programme

Gopal & Associates is auditing Himalaya Foods Ltd. for the second year. The engagement partner wants to hold a planning discussion with the engagement team. Under SA 315 (Revised), which is the correct position about this discussion?

The engagement partner and key team members must discuss how susceptible the financial statements are to material misstatement and how the financial reporting framework applies. This team discussion is mandatory in every audit under SA 315 (Revised), not just for listed entities, and covers fraud risks too.

  1. AIt is optional and need only be held if the entity is listed
  2. BThe engagement partner and other key engagement team members should discuss the susceptibility of the financial statements to material misstatement and the application of the financial reporting frameworkCorrect
  3. CIt must be held with the entity's management and those charged with governance and not among the engagement team
  4. DIt is needed only to allocate staff to audit areas and should not cover fraud risks

Explanation

SA 315 (Revised) requires the engagement partner and other key team members to discuss the susceptibility of the entity's financial statements to material misstatement and the application of the applicable financial reporting framework. This discussion is within the team and applies to all audits. The discussion should include fraud considerations, as SA 240 also requires, so the option excluding fraud is wrong.

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