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CA Intermediate · Auditing and Ethics · Risk Assessment and Internal Control

The auditor of Narmada Foods Pvt Ltd tests controls over purchases and finds that the control of matching goods received notes with purchase invoices before payment operated effectively for the first nine months, but the system was changed in January and the control was not tested afterwards. The auditor wants to rely on the control for the full year. What is the appropriate course under SA 330?

The auditor should obtain evidence for the remaining period, through additional tests of controls or substantive procedures covering the period after the January system change. Nine-month results cannot simply be extended to the whole year, because the control environment changed, yet a disclaimer is unnecessary since the gap can be addressed.

  1. ARely on the nine-month results for the whole year without further work
  2. BObtain audit evidence about the operation of the control for the remaining period, such as through additional tests of controls or substantive procedures for that periodCorrect
  3. CAbandon all reliance on controls and issue a disclaimer of opinion
  4. DTest the control only at the next year's audit

Explanation

SA 330 requires that where the auditor has tested controls during an interim period, evidence be obtained about significant changes after that date and about the remaining period, for example through further control tests or substantive procedures. Extending nine-month results to the whole year ignores the January system change. A disclaimer is excessive because the gap can be covered by further procedures.

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