CA Intermediate · Auditing and Ethics · Risk Assessment and Internal Control
The auditor of Nilgiri Pharma Ltd, a listed company, finds that during the year the company's controls over IT access were changed so that a new software was implemented in October. The auditor tested controls for April to September on the old system and now wants to conclude on operating effectiveness for the full year. Which is the correct audit response?
The auditor should also test the controls on the new system for the period after implementation and consider the controls over implementation and data migration. Evidence from the old system covers only the period it operated, so it cannot support a conclusion for the whole year.
- AConclude controls are effective for the full year since the old system tests were satisfactory
- BTest controls on the new system for the period after implementation as well, and consider the implementation controls and data migrationCorrect
- CIgnore controls on the new system because it ran only six months
- DAssume the new system is ineffective and issue an adverse opinion on the financial statements
Explanation
Evidence on controls applies to the period they operated. Where controls change, the auditor must obtain evidence on both the old and the new controls and consider data migration. Concluding for the full year from old-system tests is wrong, and an adverse opinion cannot be issued merely on assumption.
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