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CS Professional · Internal and Forensic Audit · Internal Audit Engagements and Planning

Mehta & Associates plan the audit of Ganga Steels Ltd. assuming effective controls over purchases. Later, substantive tests reveal many unrecorded liabilities, contradicting the tests of controls. What is the appropriate response under SA 300?

The auditor should modify the overall audit strategy and audit plan, including the nature, timing and extent of further procedures, based on the revised assessment of risks. Substantive evidence contradicting tests of controls is a recognised reason for changing planning decisions during the audit.

  1. AContinue with the original plan to preserve consistency
  2. BDocument the contradiction but make no change to the plan
  3. CAsk management to correct the errors and leave the plan unchanged
  4. DModify the overall audit strategy and audit plan, and the planned nature, timing and extent of further procedures, based on revised risk assessmentCorrect

Explanation

SA 300 states that audit evidence from substantive procedures may contradict evidence from tests of controls, and the auditor may need to modify the strategy and plan and the planned nature, timing and extent of further procedures based on revised assessed risks. Keeping the original plan ignores the new evidence.

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