CA Intermediate · Auditing and Ethics · Audit of Banks
In the audit of Kaveri Bank, the statutory central auditor receives the branch auditor's report on Branch X. The branch auditor has reported a qualification about inadequate provisioning on advances at that branch. Which is the appropriate response of the central auditor?
The central auditor should evaluate the branch auditor's report, assess how the provisioning shortfall affects the bank's financial statements, and deal with it appropriately in the audit report. Ignoring it, replacing the branch auditor, or informing only the RBI does not meet the auditor's reporting responsibilities.
- AIgnore the qualification since the branch is only a small part of the bank
- BEvaluate the branch auditor's report, consider its effect on the bank's financial statements, and decide how to deal with it in the audit reportCorrect
- CReplace the branch auditor and re-perform the branch audit without reference to the earlier report
- DReport the matter only to the RBI and not in the audit report
Explanation
The central auditor must consider the branch auditor's report, assess the effect of the qualification on the bank's financial statements, and deal with it in the report as the circumstances require. Ignoring it, or unilaterally replacing the branch auditor, is not the prescribed response.
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