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CS Professional · Compliance Management, Audit and Due Diligence · Audit Process and Documentation

While auditing Bharat Textiles Ltd, which uses an automated general ledger, the audit team wants to find non-standard journal entries such as a one-off impairment adjustment booked at year end. Under SA 315, which approach is most suited to identifying such entries?

Computer-assisted audit techniques are the suitable approach. In an automated general ledger, non-standard journal entries may exist only in electronic form, so SA 315 says they are more easily identified using such techniques rather than by inspecting manual ledgers or relying on assurances.

  1. AComputer-assisted audit techniques, because such entries may exist only in electronic formCorrect
  2. BInspection of paper ledgers only, because electronic entries cannot be traced
  3. CManagement's verbal assurance that no unusual entries were made
  4. DReliance on the prior year's audit file without testing current entries

Explanation

SA 315 notes that when automated procedures maintain the general ledger, non-standard journal entries may exist only in electronic form and may be more easily identified through computer-assisted audit techniques. Inspection of paper ledgers works for manual systems, not here. Management assurance alone is not audit evidence of completeness.

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