Page 57 - CA Final PARAM Digital Book.

compliance procedure including observed deviations, the auditor should evaluate whether the
internal controls are adequate for his purposes.

(iii) Evaluation - It is essentially an objective process of application of auditor’s judgement to
determine whether all or any of the internal controls in the client’s organisation can be relied upon in
carrying out the audit. Based on the degree of reliance which may be full, partial or none, the auditor
will programme for the substantive verification of transactions for expression of audit opinion. The
results of compliance procedure directly provide the basis for this evaluation and, in turn, basis to
determine the nature, timing and extent of the substantive audit procedure. In evaluating the auditor
recognises that some deviations from compliance may have occurred.

QNO Nature and extent of Planning & Changes to Planning decisions Old Course – (N21M)
149.030 TITANIUM CNO— APSE.160
Mr. S & Mr. J are a senior and junior articled assistant respectively, in a renowned audit firm. Both were
assigned statutory audit of a manufacturing company. Mr. S instructed his junior to draft an audit plan by
taking reference from a similar client (a partnership firm) who was engaged in the same business. Mr. J was
confused as to how that reference could suit in this case, since the nature and extent of planning would vary

for both clients. After few days, the audit work commenced. During the course of the audit, certain events
took place, which made Mr. J to rethink about the audit plan initially designed. He approached Mr. S and
enquired about when would an audit plan require a change. Comment about both the situations face by Mr.
J in the above situation.
Answer 1. Change:
1. Update and change: The auditor should update and change the overall audit strategy and plan during the
audit. The nature, timing, and extent of further audit procedures may need to be modified based on
reassessed risks.

2. Reasons:
2. Broad Reasons: The auditor needs to modify the overall audit strategy and plan due to below mention
factors:
• Changes in conditions
• Result of unexpected events,
• The Audit evidence obtained from the result of audit procedures.

3. Examples:
3A. Legal Changes: Changes in laws, notifications, or government policies may require updates to the overall
audit strategy.
3B. Information Discrepancy: Modifications may be required if information obtained during the audit differs
significantly from the planned procedures.
3C. Evidence Contradiction: Audit evidence from substantive procedures may contradict evidence from tests
of controls.

QNO Changes to Audit Programme Old Course – (N22E)
149.040 TITANIUM CNO— APSE.300
CA. Raj is the auditor of a multiplex cinema house. He has observed during the course of the audit, that
the existing venue has undergone renovation. The auditorium was split into smaller ones and additional
auditoriums were constructed. CA. Raj, who finalised the audit plan and audit programme wanted to
reconsider the same during the course of the audit. Discuss a few circumstances where the audit
programme would have to be suitably altered by the auditor.
In the given case of multiplex cinema house, CA Raj observed that existing venue undergone renovation,
being split into smaller ones and additional auditoriums were constructed. Since CA Raj developed the audit
program keeping in view a multiplex cinema house but during the audit, circumstances have changed
significantly and hence CA Raj should suitably alter the audit program.

Given below are a few circumstances where in the audit programme would have to be suitably altered:

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