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CA Intermediate · Auditing and Ethics · Audit Strategy, Audit Planning and Audit Programme

While planning the audit of Sahyadri Foods Pvt. Ltd., the engagement partner of Rao & Associates has a prior-year audit team that worked on the file. The partner proposes to hold the planning discussion with the engagement team only after year-end so that findings are fresh. Under SA 315 (Revised) and SA 300, what is the correct position?

The engagement partner and key team members must discuss, during planning, how susceptible the financial statements are to material misstatement. SA 315 (Revised) requires this regardless of whether the entity is listed. Delaying it until after year-end or excluding the partner would not meet the requirement.

  1. ADiscussion among key engagement team members about the susceptibility of the financial statements to material misstatement should take place during planning, and the engagement partner must be involvedCorrect
  2. BThe discussion is needed only if the entity is a listed company
  3. CThe discussion should be held by the audit manager alone, without the partner
  4. DThe discussion is optional and needs no documentation of its outcome

Explanation

SA 315 (Revised) requires the engagement partner and other key team members to discuss the susceptibility of the entity's financial statements to material misstatement and the application of the financial reporting framework. This is part of planning and takes place early. Holding it after year-end defeats the purpose, and it is not confined to listed entities.

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