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CA Final · Advanced Auditing, Assurance and Professional Ethics · Digital Auditing & Assurance

While auditing Sunrise Retail Ltd, the auditor uses a CAAT to re-perform the ageing of receivables. The tool shows 4% of balances aged differently from the company's report. Management says the tool's parameters were wrongly set by the audit team's junior. What should the engagement partner do first?

The partner should have the tool parameters reviewed and corrected, then re-run the test. Only after confirming that the audit procedure itself is sound can remaining differences be treated as misstatements and evaluated, since an unvalidated result is not reliable audit evidence.

  1. AReport a misstatement of 4% to those charged with governance immediately
  2. BReview and correct the tool parameters, re-run the test, and then evaluate any remaining differencesCorrect
  3. CIgnore the exceptions as they arise from the audit tool
  4. DWithdraw from the engagement due to a limitation on scope

Explanation

The auditor should first resolve whether the exceptions result from an error in audit procedures. Correcting the parameters and re-running provides reliable evidence; only genuine differences are then evaluated as misstatements under SA 450. Reporting before validation would be premature, and ignoring the differences would be unsupported.

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