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CA Final · Advanced Auditing, Assurance and Professional Ethics · Materiality, Risk Assessment and Internal Control

Kaveri Pharma Ltd processes lakhs of sales invoices a month through its ERP. The auditor is considering how IT affects internal control. Which statement is consistent with SA 315?

IT generally benefits internal control by consistently applying predefined business rules and complex calculations to large volumes of transactions, and by reducing the risk that controls will be circumvented, as SA 315 states. It does not remove the auditor's consideration of segregation of duties.

  1. AIT reduces the risk that controls will be circumvented and enables consistent application of predefined business rules to large volumes of transactionsCorrect
  2. BIT eliminates the need for the auditor to consider segregation of duties
  3. CIT always makes controls less reliable than manual controls
  4. DIT is beneficial only for the entity's external reporting and not for monitoring

Explanation

SA 315 says IT generally benefits internal control by consistently applying predefined business rules, reducing the risk of control circumvention and enhancing the ability to monitor performance. Option B is wrong because IT can enhance segregation of duties through security controls but does not remove the auditor's need to consider it.

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