Page 316 - CA Inter Audit PARAM

CA Ravi Taori
The· discussion between members of the engagement team members and the audit engagement partner
should be done on the susceptibility of the bank's financial statements to material misstatements. Briefly
discuss the points ordinarily included in discussion of the engagement team.

OR

You are appointed as an auditor of Banking Co. and hold discussions with engagement team. List out
matters which you would discuss at the planning stage of an audit to gain better understanding of the bank
and its environment.

Answer  The engagement team should hold discussions to gain better understanding of the bank and its
environment, including internal control, and also to assess the potential for material
misstatements of the financial statements. All these discussions should be appropriately
documented for future reference.
 The discussion provides: (These points are like benefits)
 An opportunity for more experienced engagement team members, including the audit
engagement partner, to share their insights based on their knowledge of the bank and
its environment. (E.g. IT systems data is not reliable)
 An opportunity for engagement team members to exchange information about the
bank’s business risks. (E.g. Gave huge loans to particular business family)
 An understanding amongst the engagement team members about effect of the results
of the risk assessment procedures on other aspects of the audit, including decisions
about the nature, timing, and extent of further audit procedures.

 The discussion between the members of the engagement team and the audit engagement
partner should be done on the susceptibility of the bank’s financial statements to material
misstatements. These discussions are ordinarily done at the planning stage of an audit.

 The engagement team discussion ordinarily includes a discussion of the following matters:

Errors which have been identified in prior years; (Investment Valuation)

Errors that may be more likely to occur; (NPA Provisioning)

Method by which fraud might be perpetrated by bank (Non-Banking Asset)
personnel or others within particular account balances
and/or disclosures;

Need to alert for information or other conditions that (Low Profitability Ratio)
indicates that a material misstatement may have
occurred (e.g., the bank’s application of accounting
policies in the given facts and circumstances)

Audit responses to RMM. "Using automated audit software
because heavily dependent on core
banking software"

Need to maintain professional scepticism throughout Cautiousness before relying on evidence
the audit engagement obtained

QNO Effective risk management system Old Course-- (M19E/SM20/SM21/N22M/M23R)
BA.04 #Unique New Course-- (J25M)
During the audit of Smile Bank, CA Sweety focused on understanding the risk management process of the
bank. She reviewed how management developed controls and used performance indicators to monitor key
business and financial risks. CA Sweety also assessed whether the risk management system effectively

identified and mitigated risks in required areas. How should CA Sweety evaluate the adequacy of the bank’s
risk management controls?
OR
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