ACCA Strategic Professional · Advanced Audit and Assurance (International) · Laws and regulations
Kestrel Foods plc operates in several countries. During planning for the audit of its financial statements, the audit manager asks what the auditor is responsible for in relation to laws and regulations that have a direct effect on the determination of material amounts and disclosures, such as tax and pension legislation. Which statement is correct under ISA 250 (Revised)?
For laws and regulations that directly affect material amounts and disclosures in the financial statements, such as tax and pension rules, the auditor must obtain sufficient appropriate audit evidence of compliance. Management, not the auditor, is responsible for ensuring compliance and preventing non-compliance.
- AThe auditor must obtain sufficient appropriate audit evidence about compliance with these laws and regulationsCorrect
- BThe auditor need only make inquiries of management about compliance with these laws and regulations
- CThe auditor is responsible for preventing non-compliance with these laws and regulations
- DThe auditor must report all instances of non-compliance to the regulator regardless of materiality
Explanation
ISA 250 distinguishes two categories. For laws with a direct effect on material amounts and disclosures, the auditor obtains sufficient appropriate evidence of compliance. For other laws, the work is limited to specified procedures. Management, not the auditor, is responsible for preventing non-compliance, so the third option is wrong.
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