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

Rohan & Associates audits Bharat Engineering Ltd, which outsources its payroll processing to a service organisation. The service auditor who issued a report on the service organisation is a member of the Institute of Chartered Accountants of India. As per SA 402 as modified in India, what is the position regarding the user auditor's assessment of the service auditor?

The user auditor must assess the service auditor's professional competence, except where the service auditor is also a member of the ICAI. Because the service auditor here is an ICAI member, the competence assessment is not required under the Indian version of SA 402.

  1. AThe user auditor must assess the service auditor's professional competence except where the service auditor is also a member of the ICAICorrect
  2. BThe user auditor must always assess the service auditor's competence, even if the service auditor is a member of the ICAI
  3. CThe user auditor need not assess either competence or independence of any service auditor
  4. DThe user auditor must assess competence only if the service organisation is a public sector entity

Explanation

The Indian SA 402 requires assessment of the service auditor's professional competence except where the service auditor is also a member of the ICAI. Option B ignores this carve-out. Option D wrongly ties it to public sector status, which the modification removed as a distinction.

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