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

In auditing Deccan Pharma Ltd, CA Anita finds that a pattern of errors in the sales cut-off process indicates that other misstatements may exist. The errors found so far are small, but together with other possible misstatements they could be material. Which action is consistent with SA 450?

She should determine whether the overall audit strategy and audit plan need revision. SA 450 requires this where the nature and circumstances of misstatements suggest other misstatements may exist that, when aggregated with those accumulated, could be material, even if the amounts found so far are small.

  1. AMake no change because the errors found so far are below materiality
  2. BDetermine whether the overall audit strategy and audit plan need to be revisedCorrect
  3. CLeave the plan unchanged and wait for management to correct the errors
  4. DConfine the response to reporting the errors to those charged with governance

Explanation

SA 450 requires the auditor to determine whether the strategy and plan need revision when the nature of misstatements and circumstances of occurrence indicate other misstatements may exist that, aggregated with those accumulated, could be material. Looking only at the amount found so far ignores this indication.

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