Certified Government Auditing Professional (CGAP) Practice Exam

Under what condition does an ISA not fully apply if being followed?

1. The IFAC has issued an amendment stating the ISA does not apply.

2. The supreme audit institution makes a formal determination that the ISA need not be followed.

3. The auditors provide a written rationale in the audit documentation.

4. A public sector perspective from the past concludes the ISA does not need to be followed.

The correct answer is: A public sector perspective from the past concludes the ISA does not need to be followed.

The correct answer highlights that an ISA (International Standards on Auditing) may not fully apply under circumstances that have been formally established rather than based on past conclusions or perspectives. The application of an ISA is driven by current standards and guidelines as issued by bodies like the International Federation of Accountants (IFAC). In this context, the rationale for the selected answer can be contextualized by considering the importance of adherence to current standards. An outdated or historical perspective does not carry the necessary authority or relevance to warrant deviation from an ISA. The auditing profession relies on up-to-date guidelines and standards to ensure consistency and reliability in audit practices. In contrast, if there is an official amendment from IFAC indicating that the ISA does not apply, or if a supreme audit institution formally determines that the ISA need not be followed, those would create valid exceptions for not applying an ISA. Similarly, having auditors document a written rationale in the audit documentation signifies a clear, conscious decision-making process, rather than an arbitrary or historical basis for non-application. Thus, the other options reflect appropriate mechanisms for determining ISA applicability, while the selected answer is based on obsolete understandings that do not align with current practices.