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CMA Intermediate · Corporate Accounting and Auditing · Audit Risk, Internal Control, Internal Check and Internal Audit

Shree Textiles Ltd. classifies its controls under three headings of its own and does not use the five-component labels found in SA 315. The auditor, CMA Rao, finds that every aspect covered by the five SA 315 components is addressed under the company's headings. What is the correct position under SA 315?

The auditor may accept different terminology or frameworks. SA 315 says the five-component division need not reflect how the entity designs or classifies controls, and the auditor may use other frameworks, provided all the components described in the standard are addressed. Different labels alone are not a deficiency.

  1. AThe auditor may use different terminology or frameworks, provided all the components described in SA 315 are addressedCorrect
  2. BThe auditor must report a deficiency because the entity does not follow the five-component division
  3. CThe auditor must restructure the entity's controls into five components before assessing risk
  4. DThe auditor may ignore the control activities component because the headings differ

Explanation

SA 315 states the division into components does not necessarily reflect how an entity designs, implements and maintains internal control or how it classifies any control. Auditors may use different terminology or frameworks provided all the described components are addressed. Hence no deficiency arises merely from different labels, and no component can be ignored.

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