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

Meridian Logistics Ltd outsources its payroll processing to a service organisation, and CA Anita is the user auditor. She plans to rely on a Type 2 report from a service auditor who is a member of the Institute of Chartered Accountants of India. As per the Indian modification to SA 402, what is the position regarding assessing that service auditor's professional competence?

Under the Indian version of SA 402, the user auditor must assess the service auditor's professional competence, except where the service auditor is also a member of the Institute of Chartered Accountants of India. As the service auditor here is an ICAI member, that competence assessment exception applies.

  1. AAssessment of professional competence is required except where the service auditor is also a member of the Institute of Chartered Accountants of IndiaCorrect
  2. BAssessment of professional competence is required in every case, including for ICAI members
  3. CAssessment is never required for any service auditor
  4. DAssessment is needed only for independence, never for competence

Explanation

The material modification note states that SA 402 requires assessment of the service auditor's professional competence except where the service auditor is also a member of ICAI. Since the service auditor here is an ICAI member, the competence assessment exception applies. Requiring assessment in every case ignores this Indian modification.

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