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CA Intermediate · Auditing and Ethics · Audit of Banks

While planning the audit of Ganga Bank, the statutory central auditor wants to decide how to treat the work of branch auditors for branches not visited by the central auditor. Which approach is most appropriate?

The central auditor should consider the branch auditors' reports, evaluate the effect of their observations on the financial statements, and communicate with them on significant matters. The central auditor retains responsibility for the overall opinion, so neither blind reliance nor a full re-audit is appropriate.

  1. AAccept branch auditors' reports without any review since they are independent auditors
  2. BConsider the branch auditors' reports, including any observations, and evaluate their effect on the bank's financial statements, giving directions as needed on matters such as NPA identification and following up on significant issuesCorrect
  3. CRe-perform the entire audit of all branches regardless of materiality
  4. DExclude the branches from the audit scope and state this in the report

Explanation

The central auditor remains responsible for the opinion on the bank's financial statements as a whole. The branch auditors' reports must be considered and any qualifications or significant matters evaluated, with communication and instructions to branch auditors where appropriate. Blindly accepting the reports ignores this responsibility, while re-auditing all branches is impractical and not required.

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