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• Evaluate the appropriateness of that expert’s work as audit evidence for the relevant
assertion.

• If auditor finds that civil engineer cannot be considered expert for valuation of machinery,
he should insist on other analytical procedures to confirm value of machinery.
• Even after this, if he is not satisfied, he should give qualified opinion.

QNO Data in Electronic Form Old Course – (M21E/N20R)
500.14 Bhaskar CNO SA500.110
The nature and timing of the audit procedures to be used may be affected by the fact that some of the
accounting data and other information may be available only in electronic form or only at certain points
or periods in time. Explain with the help of examples.
The nature and timing of the audit procedures to be used may be affected by the fact that some of the
accounting data and other information may be available only in electronic form or only at certain points or
periods in time. For example, source documents, such as purchase orders and invoices, may exist only in
electronic form when an entity uses electronic commerce, or may be discarded after scanning when an entity
uses image processing systems to facilitate storage and reference.

Certain electronic information may not be retrievable after a specified period of time, for example, if files are
changed and if backup files do not exist. Accordingly, the auditor may find it necessary as a result of an entity’s
data retention policies to request retention of some information for the auditor’s review or to perform audit
procedures at a time when the information is available.

QNO-- Selection of Item For Audit Evidence New Course – (M24M/M24E)
500.16 Bhaskar CNO – SA 500.180

Sanjeev, an articled clerk in an audit firm, is part of an engagement team conducting audit of a company for
year 2023-24. It is a small company having a turnover of about ₹ 25 crores. During the course of audit, he
notices that senior team member has taken following approach for selecting items for testing reflected in
financial statements to obtain audit evidence: -

• He has selected to test items debited under the head “Machinery repair & maintenance” as expenditure
relating to it during year 23-24 has increased considerably as compared to last year.
• Out of purchases, he has selected to test purchases from related parties amounting to ₹ 5 crores.
• He has also selected to test all individual items of expenditure exceeding ₹ 5 lakhs.
• Besides, he has also selected amount of ₹ 0.50 lakhs debited under head “legal expenses” to know

purpose of payment made to external legal counsel.

Sanjeev understands that senior team member is using “audit sampling” for selecting items for testing. Do
you agree with him? Which risk is involved in above approach? Discuss with reasons.
OR
M/s KLM & Co. Chartered Accountants, a partnership firm, while designing tests of controls and tests of
details in MN Ltd. has to determine the items for testing that can be effective in meeting the purpose of the
audit procedure. For this, they decided to select specific items from a population. State the factors that can
be considered by the audit firm for selecting specific items from a population and also state the specific items
that can be included for such testing.
Answer Audit Sampling refers to the application of audit procedures to less than 100% of items within a population
relevant under the audit such that all sampling units (i.e. all the items in the population) have an equal chance
of selection.

In the given situation, senior team member is not selecting items for testing by means of audit sampling. He
is only selecting specific items from a population. In accordance with SA 500, one of the means available to
auditor for selecting items for testing is “by selecting specific items.”

Specific items selected may include: -

• High value or key items: The auditor may decide to select specific items within a population because
they are of high value, or exhibit some other characteristic, for example, items that are suspicious,
unusual, particularly risk-prone or that have a history of error.
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