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

Rohan & Associates audits Meridian Pharma Ltd, a company that processes a very high volume of sales invoices through an automated billing system. The audit senior says IT-based controls are always inferior to manual controls. Which view is consistent with SA 315?

IT generally benefits internal control by consistently applying predefined business rules and performing complex calculations on large volumes of transactions. SA 315 also says it improves timeliness and accuracy, reduces the risk of circumvention and supports segregation of duties, so the claim that IT controls are always inferior is wrong.

  1. AIT helps internal control by consistently applying predefined business rules and performing complex calculations on large volumes of transactionsCorrect
  2. BIT controls are unreliable because they cannot enhance segregation of duties
  3. CIT increases the risk that controls will be circumvented, so the auditor must disregard them
  4. DIT improves only the timeliness of information and nothing else

Explanation

SA 315 states that IT generally benefits internal control by consistently applying predefined business rules and performing complex calculations on large volumes of data. It also notes that IT reduces the risk of circumvention and can strengthen segregation of duties through security controls. The senior's blanket view is therefore not supported.

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