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

Ramesh & Co. audits Sundaram Retail Ltd, which processes lakhs of sales invoices a day through an ERP. The auditor is assessing the benefits of IT to internal control under SA 315. Which of the following is a recognised benefit of IT?

A recognised benefit of IT in internal control under SA 315 is that it consistently applies predefined business rules and performs complex calculations when processing large volumes of transactions. It reduces, but does not eliminate, the risk of circumvention, and it enhances rather than replaces monitoring.

  1. AIt removes the need for management to monitor the performance of the entity's activities
  2. BIt consistently applies predefined business rules and performs complex calculations on large volumes of transactionsCorrect
  3. CIt makes manual controls more suitable for large, unusual or non-recurring transactions
  4. DIt eliminates the risk of controls being circumvented in all cases

Explanation

SA 315 states that IT enables consistent application of predefined business rules and complex calculations on large volumes of data. It enhances, not removes, the ability to monitor performance. It reduces, not eliminates, the risk that controls will be circumvented, so the last option overstates the benefit. The third option is not a benefit of IT at all.

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