RST & Co., Chartered Accountants, have been the statutory auditors of Bright Vision Ltd., a company engaged in wholesale trading of electronic…

There should be periodic review of the audit programme to assess whether the same continues to be adequate for obtaining requisite knowledge and evidence about the transactions. Unless this is done, any change in the business policy of the client may not be adequately known, and consequently, audit work may be carried on, on the basis of an obsolete programme and, for this negligence, the whole audit may be held as negligently conducted and the auditor may have to face legal consequences. In the given case, Bright Vision Ltd. introduced significant changes in its operations, such as online sales, third-party warehouses, implementation of a new ERP system, and extended credit terms. These changes directly impacted revenue recognition, inventory control, receivables management, and internal controls. However, the audit firm failed to revise or review the existing audit programme and continued to apply procedures designed for a traditional wholesale model. The utility of the audit programme can be retained and enhanced only by keeping the programme as also the client's operations and internal control under periodic review so that inadequacies or redundancies of the programme may be removed. Since no review was undertaken, the audit procedures became outdated and inadequate to address the changed risk environment. Although assistants are required to strictly follow the audit programme as approved by the principal, the responsibility to update and revise the programme lies with the auditor. The argument that adherence to a fixed programme creates rigidity is not valid, provided periodic review is undertaken and assistants are encouraged to observe and report significant changes in the client's accounting functions. The auditor was not justified in continuing with the obsolete audit programme without periodic review. Failure to revise the audit programme in light of significant business and control changes amounts to negligence, and the auditor may be held responsible for inadequately conducted audit and consequent legal implications.