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CA Final · Advanced Auditing, Assurance and Professional Ethics · General Auditing Principles and Auditors Responsibilities

Himalaya Pharma Ltd outsources its payroll processing to a service organisation, whose service auditor is a member of the Institute of Chartered Accountants of India. The user auditor wishes to use the service auditor's report as audit evidence. What is the Indian modification to SA 402 regarding assessing the service auditor?

Indian SA 402 requires the user auditor to assess the service auditor's professional competence, except where the service auditor is also a member of the ICAI. Since the service auditor here is an ICAI member, the competence assessment is not required.

  1. AThe user auditor need not assess the service auditor's professional competence where the service auditor is a member of the ICAICorrect
  2. BThe user auditor must assess the service auditor's professional competence in every case without exception
  3. CThe user auditor is not required to assess the service auditor's independence or competence for any service auditor
  4. DThe user auditor may rely on the report only if the service auditor is also appointed as the entity's statutory auditor

Explanation

The material modifications note that the Indian SA 402 requires assessment of the service auditor's professional competence except where the service auditor is also a member of the ICAI. Hence the competence assessment is dispensed with for an ICAI member. The option saying it is required in every case ignores this exception.

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