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CA Final · Advanced Auditing, Assurance and Professional Ethics · Audit Planning, Strategy and Execution

While planning the audit of Himalaya Finserve Ltd, CA Isha notes material accounting estimates based on complex actuarial and valuation models, and her team lacks the needed expertise. What is the appropriate planning response in line with SA 540 and SA 220?

She should ascertain the resources required, including involving people with specialised skills or knowledge, and the engagement partner must be satisfied that the team and any auditor's experts collectively have the appropriate capabilities, competence and time. Lack of expertise does not justify reducing scope or deferring.

  1. AReduce the audit scope on estimates since the team lacks expertise
  2. BAscertain the resources needed, including involving those with specialised skills, and ensure the engagement partner is satisfied the team and any auditor's experts collectively have the appropriate capabilities, competence and timeCorrect
  3. CAsk management to appoint its own expert and rely solely on that expert's conclusion without evaluation
  4. DDefer the issue until the audit report is drafted

Explanation

SA 540 notes that in planning, the auditor ascertains the nature, timing and extent of resources needed, which may include specialised skills, and SA 220 requires the engagement partner to be satisfied the team and any auditor's experts collectively have the capabilities, competence and time. Reducing scope or deferring the issue is inappropriate, and sole reliance on management's expert ignores that duty.

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