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CS Professional · Compliance Management, Audit and Due Diligence · Audit Engagement

While auditing Kaveri Foods Pvt Ltd, the auditor relied on tests of controls over sales. Later, substantive procedures on year-end receivables produced evidence contradicting the control tests. What should the auditor do under SA 300?

The auditor should modify the overall audit strategy and audit plan, and so the nature, timing and extent of further procedures, on the basis of revised assessed risks. SA 300 recognises that contradictory evidence, such as substantive results conflicting with control tests, calls for such changes.

  1. AIgnore the substantive results since controls were already tested
  2. BContinue with the original plan unchanged to protect the audit timetable
  3. CModify the overall audit strategy and audit plan, and the planned nature, timing and extent of further procedures, based on the revised assessed risksCorrect
  4. DWithdraw from the engagement immediately

Explanation

SA 300 says that when audit evidence from substantive procedures contradicts evidence from tests of controls, the auditor may need to modify the strategy and plan and the planned nature, timing and extent of further procedures based on revised risk assessment. Ignoring the contradiction would be wrong.

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