MCQ 5- During the audit of Delta Ltd.

MCQ 5-

During the audit of Delta Ltd., the engagement team identifies a significant matter concerning the recoverability of a large receivable. The audit manager performs extensive procedures and concludes that the evidence obtained is sufficient and appropriate.

However, the manager’s working paper records only:

“Recoverability checked. Evidence satisfactory. No further action required.”

The engagement partner argues that this is sufficient because the actual audit procedures were performed and the underlying evidence is available elsewhere in the audit file. The partner further states that requiring the working paper to explain the auditor’s reasoning would amount to requiring the auditor to document every thought process involved in exercising professional judgment.

Which of the following is MOST ACCURATE under SA 230?

A. The documentation is sufficient because SA 230 requires documentation of procedures performed and evidence obtained, but does not require documentation of the auditor’s conclusions where the underlying evidence is available elsewhere in the file.

B. The documentation is insufficient because the auditor shall prepare audit documentation sufficient to enable an experienced auditor, having no previous connection with the audit, to understand the nature, timing and extent of the procedures performed, the results and evidence obtained, and significant matters arising during the audit, including the significant professional judgments made in reaching conclusions on those matters.

C. The documentation is insufficient only because all professional judgments made by the auditor, including preliminary thoughts and rejected alternatives, must be recorded in the audit documentation.

D. The documentation is sufficient provided the engagement partner personally confirms that the procedures were actually performed, because SA 230 permits oral explanations by the engagement partner to supplement incomplete written documentation.