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CA Intermediate · Auditing and Ethics · Completion and Review

While auditing Kaveri Textiles Ltd for the year ended 31 March, CA Mehta finds that the audit team has gathered evidence on all assertions. Before finalising the opinion, the engagement partner asks the team to read the whole financial statements again and examine whether the overall picture is consistent with what the auditor knows about the entity. Which audit procedure is the partner primarily performing?

The partner is performing analytical procedures near the end of the audit as an overall review. SA 520 requires such procedures to help form an overall conclusion on whether the financial statements are consistent with the auditor's understanding of the entity, which is exactly what the re-reading achieves.

  1. ASubstantive analytical procedures near the end of the audit, as an overall reviewCorrect
  2. BTests of controls on the revenue cycle
  3. CInquiry for obtaining a management representation about related parties
  4. DPhysical verification of inventory at the year-end

Explanation

SA 520 requires the auditor to design and perform analytical procedures near the end of the audit that assist in forming an overall conclusion on whether the financial statements are consistent with the auditor's understanding of the entity. Reading and evaluating the overall financial statements fits this description. Tests of controls and inventory verification are specific procedures and not an overall review.

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