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CA Final · Advanced Auditing, Assurance and Professional Ethics · Digital Auditing & Assurance

Sundaram & Co., chartered accountants, audit Veena Textiles Ltd., which runs its sales cycle on an ERP system. The engagement team wants to rely on automated three-way matching of purchase orders, goods receipt notes and invoices. Which action best supports the auditor's reliance on this automated control under SA 315 and SA 330?

The auditor should test the automated matching control for a sample and also test the general IT controls over program changes and access. Automated controls operate consistently only if the programs and configuration stay unchanged, so evidence on general IT controls supports reliance. Vendor reputation or management assertions are not sufficient evidence.

  1. ATest the control manually for a sample of transactions and also test general IT controls over program changes and accessCorrect
  2. BRely on the control because the ERP vendor is well known
  3. CTest only the invoices that the system has rejected
  4. DAssume the control is effective because no exceptions were reported by management

Explanation

An automated control operates consistently unless the program or its configuration is changed. The auditor therefore tests the control once (or a small sample) and tests general IT controls such as change management and access to confirm it continues to work. Relying on vendor reputation or management's statement is not audit evidence, and testing only rejected items ignores wrongly accepted items.

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