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CA Final · Advanced Auditing, Assurance and Professional Ethics · Completion and Review

Auditor CA Mehta is auditing Gandhar Foods Ltd. Management gave written representations dated 12 May, but the auditor's report is to be dated 25 May. A fire on 18 May destroyed a warehouse and management made a disclosure note. Which action best reflects audit practice under SA 560 and SA 580 principles?

The auditor should perform subsequent-events procedures up to the report date, evaluate the fire's effect on the financial statements and disclosure, and obtain written representations dated as near as practicable to, but not after, the report date, so they cover the period including the fire.

  1. ARely on the 12 May representations since they were signed by management
  2. BDate the audit report 12 May to match the representations
  3. CPerform subsequent-events procedures up to the report date, consider the fire's effect on the statements, and obtain representations dated as near as practicable to, but not after, the report dateCorrect
  4. DIgnore the fire because it occurred after the balance sheet date

Explanation

Subsequent-events procedures run to the report date (SA 560 A6), so the 18 May fire must be evaluated. Representations should be dated as near as practicable to the report date so they cover that period. Dating the report 12 May would be backdating and would not remove the duty to consider the fire.

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