Skip to content

ACCA Strategic Professional · Advanced Audit and Assurance (International) · Laws and regulations

Aldous Retail's auditor identifies a non-compliance with tax regulations. Management has corrected it and paid the penalty, and the amount is clearly inconsequential. How should the auditor deal with it under ISA 250 (Revised)?

The auditor evaluates the effect on the financial statements and, because the matter is clearly inconsequential and corrected, uses judgement over communication while documenting the conclusion. A modified opinion, withdrawal or regulator report would be disproportionate, as ISA 250 (Revised) does not require communication of clearly inconsequential matters.

  1. AReport it to the regulator regardless of its size
  2. BIssue a modified opinion because any non-compliance is a misstatement
  3. CWithdraw from the engagement because the client has breached the law
  4. DAssess the effect on the financial statements and, as it is clearly inconsequential, use judgement on communication, normally making those charged with governance aware only if appropriate and keeping the matter documentedCorrect

Explanation

ISA 250 (Revised) allows the auditor to use judgement about communication of matters that are clearly inconsequential, in terms of both nature and amount. The auditor still evaluates effect and documents conclusions. A modified opinion or withdrawal is not warranted for a trivial, corrected item, and automatic reporting to a regulator would breach confidentiality unnecessarily.

Did you get it right without looking?

One question tells you little. A timed set on Laws and regulations shows your real accuracy, how long you take and where you lose marks.

Practise Laws and regulationsFree diagnostic mock

More Laws and regulations questions