Page 61 - CA Final PARAM Digital Book.

Part 2- SA 600

QNO Aspects to be considered while accepting position of principal auditor Old Course –(M21E)
100.400 TITANIUM CNO—SA600.040 New Course –(SM23)

PQ Limited, a listed entity, headquartered in Mumbai and is having 15 branches all over India. The
Company is in the business of buying paddy grown by farmer directly and processing to produce final
products for selling in domestic as well as international markets. PQ Limited appointed four firms of

Chartered Accountants for audit of its head office and branches. Your firm is one of those firms. It was
agreed that your firm will act as Principal auditor. What factors will be considered by you while
accepting the position of Principal auditor?
Answer Factors to be considered while accepting the position of Principal auditor -
SA 600 – Using the work of Another Auditor –

While accepting the position of Principal Auditor, the auditor should consider whether the auditor's
own participation is sufficient to be able to act as the principal auditor.For this purpose, the auditor
would consider:

The auditor should consider whether the auditor's own participation is sufficient to be able to act as
the principal auditor. For this purpose the auditor would consider:

(a) the materiality of the portion of the financial information which the principal auditor audits;
(b) the principal auditor's degree of knowledge regarding the business of the components;
(c) the risk of material misstatements in the financial information of the components audited by
the other auditor; and
(d) the performance of additional procedures as set out in this SA regarding the components
audited by other auditor resulting in the principal auditor having significant participation in
such audit.

QNO Examining work of Other Auditor & sharing of working papers New Course – (SM23)
100.600 TITANIUM CNO-- SA600.060
"
"Kukreja & Associates is the principal auditor of MN Ltd. The company is engaged in the manufacture of
sports items and operates through its 14 branches all over India. With respect to the audit of branches,
the company has appointed seven Chartered Accountant firms, each firm conducting the audit of two
branches. The audit reports in respect of accounts of branches have already been sent to the principal
auditor. While analysing the work of the branch auditors, CA Kukreja, the engagement partner, asked the
branch auditors to share with him a summary of the audit procedures and findings in respect of the
accounts of the branches examined by them. CA Kukreja also asked one of the branch auditors to share
his working paper with respect to the two branches examined by that branch auditor for his review and
return. Is the principal auditor correct in asking the branch auditors for sharing the summary and the
working papers for his review."
Answer In terms of SA 600 “Using the Work of Another auditor”, where another auditor has been appointed for the
component, the principal auditor would normally be entitled to rely upon the work of such auditor unless
there are special circumstances to make it essential for him to visit the component and/or to examine the
books of account and other records of the said component. When planning to use the work of another
auditor, the principal auditor should consider the professional competence of the other auditor in the
context of specific assignment if the other auditor is not a member of the Institute of Chartered Accountants
of India.
The principal auditor should perform procedures to obtain sufficient appropriate audit evidence, that the
work of the other auditor is adequate for the principal auditor's purposes, in the context of the specific
assignment.
The principal auditor might discuss with the other auditor the audit procedures applied or review a written
summary of the other auditor’s procedures and findings which may be in the form of a completed
questionnaire or checklist.

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