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

Meenakshi Retail Ltd uses an automated billing system. The auditor is deciding which controls are better handled by manual elements. Under SA 315, for which circumstance are manual elements of internal control generally more suitable?

Manual elements of internal control are generally more suitable for large, unusual or non-recurring transactions, where judgment and discretion are required. Automated controls suit high-volume routine processing, complex calculations and consistent application of predefined business rules, as SA 315 explains.

  1. AProcessing a large volume of routine invoices with predefined business rules
  2. BLarge, unusual or non-recurring transactions that require judgment and discretionCorrect
  3. CPerforming complex calculations repeatedly on bulk data
  4. DConsistently applying the same pricing rules to every sale

Explanation

SA 315 states that manual elements may be more suitable where judgment and discretion are required, such as large, unusual or non-recurring transactions. The other options describe benefits of IT: consistent application of predefined rules, complex calculations and high volumes.

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