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CS Professional · Internal and Forensic Audit · Internal Audit Engagements and Planning

While auditing Himalaya Foods Ltd, the auditor planned to rely on controls over purchases. Substantive procedures later reveal significant unrecorded liabilities, contradicting the earlier test-of-controls evidence. What does SA 300 expect the auditor to do?

The auditor should modify the overall audit strategy and audit plan, and so the planned nature, timing and extent of further procedures, based on revised assessed risks. SA 300 treats planning as continual and gives contradiction between substantive evidence and tests of controls as an example.

  1. AContinue with the original plan because planning is completed before fieldwork
  2. BIgnore the substantive results and rely on the control tests
  3. CModify the overall audit strategy and audit plan, and the planned nature, timing and extent of further procedures, based on revised assessed risksCorrect
  4. DWithdraw from the engagement immediately

Explanation

SA 300 states that unexpected events or audit evidence may require modifying the strategy and plan, and thus the planned nature, timing and extent of further procedures, on the basis of revised risk assessment. It gives contradiction between substantive and controls evidence as an example. Planning is continual, not a one-time phase.

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