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

Gupta & Co. is auditing Himgiri Pharma Ltd. During execution of the audit, the team finds that the client's internal control over purchases is weaker than assessed at planning, and unexpected related party transactions emerge. The audit plan was approved by the partner two months earlier. Which action is correct under SA 300?

The auditor should revise the overall audit strategy and audit plan as needed and document significant changes and the reasons for them. SA 300 treats planning as continuous and iterative, so findings such as weaker controls or unexpected related party dealings must feed into amended procedures.

  1. AContinue strictly with the original plan, since a plan once approved cannot be changed
  2. BUpdate and change the overall audit strategy and audit plan as necessary during the course of the audit, and document the significant changes and reasonsCorrect
  3. CChange the plan informally without documentation, as plan changes are not documentary matters
  4. DWithdraw from the engagement immediately because the plan has failed

Explanation

SA 300 states that planning is continuous and iterative; the auditor must update the strategy and plan as necessary and document significant changes and the reasons. Unexpected findings may also require revised risk assessments and further procedures. Continuing unchanged ignores new information, and withdrawal is not required by these facts.

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