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CA Final · Advanced Auditing, Assurance and Professional Ethics · General Auditing Principles and Auditors Responsibilities

Mehta & Co, chartered accountants, audit Sagar Pharma Ltd, which uses an external payroll processor. The processor's service auditor, a member of the ICAI, has issued a report. The engagement partner wants to rely on it as audit evidence. Under SA 402 as modified for India, what is the position on assessing the service auditor's professional competence?

Under the Indian version of SA 402, the user auditor must assess the service auditor's professional competence when using the report, except where the service auditor is also a member of the ICAI. The exception is a specific Indian modification to the international standard.

  1. AAssessment of competence and independence is not required in any case
  2. BAssessment of professional competence is required, except where the service auditor is also a member of the Institute of Chartered Accountants of IndiaCorrect
  3. CAssessment of competence is required in every case, including for ICAI members, and cannot be waived
  4. DAssessment is required only if the service organisation is a listed entity

Explanation

The material modifications to SA 402 note that the corresponding paragraphs require assessment of the service auditor's professional competence except where the service auditor is also an ICAI member. Option C ignores this Indian modification. Options A and D have no basis in the standard.

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