During the audit of a manufacturing company, the engagement team encountered several complex areas requiring careful evaluation. The audit senior…
CA Intermediate · Auditing and Ethics · PYQS · May 2026
During the audit of a manufacturing company, the engagement team encountered several complex areas requiring careful evaluation. The audit senior reminded the team that matters involving higher judgement must be documented more thoroughly. An important factor in determining the form, content and extent of audit documentation of significant matters is the extent of professional judgement exercised in performing the work and evaluating the results. Explain, stating clearly the examples of significant matters (referring SA 230).
Suggested Answer and Working Notes:
(a) Examples of significant matters include: Matters that give rise to significant risks. (i) Results of audit procedures indicating (a) that the financial statements could be materially misstated, or (b) a need to revise the auditor's previous assessment of the risks of material misstatement and the auditor's responses to those risks. (ii) Circumstances that cause the auditor significant difficulty in applying necessary audit procedures. (iii) Findings that could result in a modification to the audit opinion or the inclusion of an Emphasis of Matter Paragraph in the auditor's report.
Topics: Audit Documentation
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