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

Sundaram Pharma Ltd outsources its payroll processing to a service organisation. The service auditor who issued a report on the controls is a member of the Institute of Chartered Accountants of India. CA Anita, the user auditor, is evaluating how to use the report. Under SA 402 as modified in India, what is the position on assessing the service auditor?

Anita need not assess the service auditor's professional competence because the Indian SA 402 requires such assessment except where the service auditor is a member of the Institute of Chartered Accountants of India. This is a deliberate modification from ISA 402.

  1. AAnita need not assess the service auditor's professional competence because he is a member of ICAICorrect
  2. BAnita must always assess both competence and independence from the service organisation without exception
  3. CAnita need not assess independence but must assess competence for every service auditor
  4. DAnita must discontinue the audit since reliance on any service auditor report is prohibited

Explanation

The Indian SA 402 requires assessment of the service auditor's professional competence except where the service auditor is a member of ICAI. Hence the assessment of competence is not required here. Option claiming it is always required ignores this India-specific modification.

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