CS Professional · Compliance Management, Audit and Due Diligence · Audit Process and Documentation
While auditing Bharat Components Ltd, the auditor finds that the company's general ledger is maintained on an automated system. During the year the company recorded an asset impairment and entries for a business combination as non-standard journal entries. Which statement best reflects SA 315 (as reproduced) on identifying such entries?
Where the ledger is automated, non-standard journal entries such as those for impairment or a business combination may exist only in electronic form, and they may be more easily identified through computer-assisted audit techniques rather than by inspecting paper ledgers.
- ASuch entries exist only in manual form and can never be identified
- BSuch entries are routine and need no separate attention in the financial reporting process
- CIn automated systems such entries may exist only in electronic form and may be more easily identified using computer-assisted audit techniquesCorrect
- DIn automated systems such entries can be identified only by inspecting paper ledgers
Explanation
SA 315 says non-standard journal entries record non-recurring, unusual transactions or adjustments, such as business combinations and impairment estimates. In manual systems they are found through inspection of ledgers, journals and documents; with automated systems they may exist only electronically and are more easily identified through computer-assisted audit techniques.
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