CA Final · Advanced Auditing, Assurance and Professional Ethics · Group Audits
Rao & Co are considering acting as principal auditor for Vindhya Power Ltd. They audit components representing about 60% of the group financial information, know the business of all components well, and assess a low risk of material misstatement in the components audited by another auditor. Which conclusion best fits SA 600's considerations?
Their participation is likely sufficient. SA 600 asks the auditor to weigh the materiality of the portion they audit, their knowledge of the components' business, and the risk in the other auditor's components. A 60% share, good knowledge and low risk support acting as principal auditor.
- ATheir participation is likely sufficient, as the materiality, knowledge and risk factors all support acting as principal auditorCorrect
- BThey cannot act as principal auditor unless they audit 100% of the group
- CThey cannot act as principal auditor because another auditor audits part of the group
- DThey must resign, since knowledge of components is irrelevant under SA 600
Explanation
SA 600 factors are materiality of the portion audited, knowledge of the components' business, risk of misstatement in the other auditor's components, and additional procedures. A majority portion, good knowledge and low risk all point to sufficient participation. The standard does not require auditing all components.
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