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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Laws and regulations

Zephyr Components, an audit client, operates in the chemicals sector. During planning, the audit senior asks what the auditor's responsibility is for compliance with laws and regulations under ISA 250 (Revised). Which statement correctly describes that responsibility?

Under ISA 250 (Revised), the auditor must obtain sufficient appropriate evidence on compliance with laws that directly affect material amounts and disclosures in the financial statements. The auditor also performs specified procedures to identify other non-compliance, but does not give assurance on compliance with all laws.

  1. AThe auditor must obtain reasonable assurance that the entity complies with all laws and regulations that apply to it
  2. BThe auditor must obtain sufficient appropriate evidence about compliance with laws and regulations generally recognised to have a direct effect on the determination of material amounts and disclosures in the financial statementsCorrect
  3. CThe auditor is responsible for preventing and detecting all non-compliance by the entity
  4. DThe auditor has no responsibility for laws and regulations because management is responsible for compliance

Explanation

ISA 250 requires the auditor to obtain sufficient appropriate evidence on laws with a direct effect on material amounts and disclosures, and to perform specified procedures to identify other non-compliance that may have a material effect. Option A overstates the duty, since the auditor cannot give assurance on compliance with all laws. Option D is wrong because management has primary responsibility but the auditor still has defined responsibilities.

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