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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Evidence and testing considerations

Orion Logistics Ltd has a payroll system with 4,200 employees. The audit team uses an automated tool to match every employee record to HR starting and leaving dates and to bank account details, listing exceptions such as duplicate bank accounts. Which description best fits this approach under ISA 500 and ISA 330?

This is an audit procedure applied to the full population with an automated tool. The auditor still must assess the reliability of the data used and investigate each exception, such as duplicate bank accounts, to conclude on possible ghost employees.

  1. AIt is a substantive test that replaces any need to assess the reliability of the data used
  2. BIt is a test of controls only, because the whole population is covered
  3. CIt is an audit procedure using automated tools on the full population, but the auditor must still evaluate the reliability of the information used and follow up exceptionsCorrect
  4. DIt is an analytical procedure under ISA 520 because it uses data

Explanation

Automated tools can test an entire population and highlight anomalies, but ISA 500 requires the auditor to consider the relevance and reliability of the information used as evidence. Exceptions must be investigated. It is a detailed testing procedure, not an ISA 520 analytical procedure, which evaluates plausible relationships among data.

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