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CA Intermediate · Auditing and Ethics · Audit Documentation

Meena & Co. are the auditors of Bharat Plastics Ltd. A departure from a relevant requirement in a Standard on Auditing was necessary because an alternative procedure was performed. The junior asks what must be documented under SA 230. Which is the correct response?

The auditor must document how the alternative procedures achieved the aim of the requirement and the reasons for the departure from the SA. Declaring the requirement inapplicable or mentioning it in a management letter does not meet SA 230, which expects the circumstances and rationale to appear in the audit file.

  1. ANothing, as alternative procedures need not be documented
  2. BOnly that the requirement was not applicable
  3. CThe circumstances, how the alternative procedures achieved the aim of the requirement, and the reasons for the departureCorrect
  4. DOnly a note in the management letter

Explanation

SA 230 states that if the auditor finds it necessary to depart from a relevant requirement in an SA, the auditor documents how alternative audit procedures performed achieve the aim of that requirement and the reasons for the departure. Stating non-applicability or using the management letter does not satisfy the requirement.

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