Page 473 - CA Final PARAM Digital Book.

QNO No need to Document Everything New Course-(M22E)
8.500 #UNIQUE
You are the team leader of 10 members for an audit of a Multinational Company. All the team members
are concerned about audit documentation in order to provide evidence that the audit complies with SAs.
Hence, the team members wish to document every matter concerned. In your opinion it is neither
necessary nor practicable for the auditor to document every matter considered or professional judgement
made in an audit. Further you feel that it is unnecessary for the auditor to document separately compliance
with matters for which compliance is demonstrated by documents included within the audit file. Illustrate
by giving examples with reference to relevant Standard on Auditing.
Answer SA 230, “Audit Documentation”, provides evidence that the audit complies with SAs. However, it is
neither necessary nor practicable for the auditor to document every matter considered, or professional
judgment made, in an audit.
For example,
(i) the existence of an adequately documented audit plan demonstrates that the auditor has
planned the audit.
(ii) the existence of a signed engagement letter in the audit file demonstrates that the auditor
has agreed the terms of the audit engagement with management, or where appropriate,
those charged with governance.
(iii) An auditor’s report containing an appropriately qualified opinion demonstrates that the
auditor has complied with the requirement to express a qualified opinion under the
circumstances specified in the SAs.
(iv) In relation to requirements that apply generally throughout the audit, there may be a
number of ways in which compliance with them may be demonstrated within the audit
file:
• For example, there may be no single way in which the auditor’s professional
skepticism is documented. But the audit documentation may nevertheless
provide evidence of the auditor’s exercise of professional skepticism in
accordance with SAs. Such evidence may include specific procedures
performed to corroborate management’s responses to the auditor’s inquiries.
• Similarly, that the engagement partner has taken responsibility for the
direction, supervision and performance of the audit in compliance with the SAs
may be evidenced in a number of ways within the audit documentation. This
may include documentation of the engagement partner’s timely involvement
in aspects of the audit, such as participation in the team discussion required
by SA 315 “Identifying and Assessing the Risks of Material Misstatement
through Understanding the Entity and Its Environment”.

SA450

QNO Sources of Misstatement Old Course – (M12M, N12R, M13E, P17M, M18M)
54.000 TITANIUM CNO-- SA450.020 New Course – (N18R,M22R)
In audit plan for T Ltd, as the audit partner you want to highlight the sources of misstatements, arising

from other than fraud, to your audit team and caution them Identify the sources of misstatements.

Answer Part I -- Relevant Standards & Laws
▪ SA 450, Evaluation of Misstatements identified during the Audit

Part II -- Requirements of Relevant Standards & Laws
➢ According to SA 450, the following are the sources of misstatements arising from other than fraud
omission / Inaccurate Gathering of Data / Inappropriate selection & application of
AP / Inaccurate Processing / Unreasonable Estimates by Mgt / Incorrect Estimate
because of Overlooking or Misinterpretation
• An omission of an amount or disclosure;
• An inaccuracy in gathering or processing data from which the financial statements
are prepared;

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