Page 224 - CA Final PARAM Digital Book.

Part 2 - SA 805

QNO Challenges in Auditing Specific Element of Financial Statement New Course – (SM23)
805.100 TITANIUM CNO-- SA 805.040
CA G is offered appointment for audit of trade payables of financial statements of a company. However,
financial statements prepared under Companies Act, 2013 are audited by CA Jignesh. Discuss why it would
be practically difficult for CA G to perform such an audit.
Answer 1. SA 805: Reference to SA 805, its full name & its applicable in the given scenario.
2. Concept: Considerations When Accepting Such Engagement
2. Challenges when the auditor is not also engaged to audit the entity’s complete set of financial
statements Practicability of Audit in Accordance with SAs: If the auditor is not also engaged to audit the
entity’s complete set of financial statements, the auditor shall determine whether the audit of a single
financial statement or of a specific element of those financial statements in accordance with SAs is
practicable.
2A. Understanding of the Entity and Its Environment: In such cases, the auditor often does not have the
same understanding of the entity and its environment, including its internal control, as an auditor who
also audits the entity’s complete set of financial statements.
2B. General quality of the accounting records or other accounting information: The auditor also does
not have audit evidence about the general quality of the accounting records or other accounting
information that would be acquired in an audit of the entity’s complete set of financial statements.
Accordingly, the auditor may need further evidence to corroborate audit evidence acquired from the
accounting records.
2C. Disproportionate Audit Work for Specific Element: In the case of an audit of a specific element of a
financial statement, certain SAs require audit work that may be disproportionate to the element being
audited. For example, although the requirements of SA 570 are likely to be relevant in the circumstances
of an audit of a schedule of accounts receivable, complying with those requirements may not be
practicable because of the audit effort required.
3. Not practical: If the auditor concludes that an audit of a single financial statement or of a specific
element of a financial statement in accordance with SAs may not be practicable, the auditor may discuss
with management whether another type of engagement might be more practicable.

3. Case Discussion: Discuss Case.
4. Conclusion: After Evaluating above 3 points Auditor will have to decide is it practical. If yes accept
assignment or else discuss with management for another type of engagement is suggested.

Impact of Modification on Complete Set on Report of Specific New Course – (SM23)
QNO
Element
805.200
TITANIUM CNO-- SA 805.100
CA P is auditor of a company responsible for auditing complete set of financial statements. He intends to
express adverse opinion on complete set of financial statements considering conclusions drawn by him
during course of audit. He is also auditing trade receivables of company for the same period in a separate
engagement. Can he express unmodified opinion in respect of trade receivables? If so, discuss those
circumstances.
Answer 1. SA 810: Reference to SA 810, its full name & its applicable in the given scenario.
2. Concept: (CNO SA- 805.100) Forming an Opinion and Reporting Considerations (Unmodified Opinion on
Specific Element Permitted)
Unmodified Opinion on Specific Element Permitted: If the auditor concludes that it is necessary to express
an adverse opinion or disclaim an opinion on the entity’s complete set of financial statements as a whole but
considers it appropriate to express an unmodified opinion on a specific element included in those financial
statements, the auditor shall only do so if certain conditions are met.
a) The auditor is not prohibited by law or regulation from doing so;
b) That opinion is expressed in an auditor’s report that is not published together with the auditor’s report
containing the adverse opinion or disclaimer of opinion; and

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