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CA Intermediate · Auditing and Ethics · Completion and Review

Auditor CA Rohan signed the audit report of Gomti Engineering Ltd on 20 May 2026, and the financial statements were approved by the board the same day. On 10 June 2026, before the AGM, he learns that a fraud, existing as at 31 March 2026, led to a material overstatement of inventory. The facts existed at the report date but he was not aware of them. Management agrees the statements are misstated. What is the correct course under SA 560?

The auditor should discuss the matter with management and those charged with governance, and if the financial statements are amended, perform the necessary audit procedures on the amendment and issue a new or amended report dated no earlier than the approval of the revised statements, as SA 560 requires.

  1. ADo nothing because the report is already signed and approved
  2. BDiscuss with management and those charged with governance, and if the financial statements are amended, carry out the necessary audit procedures on the amendment and issue a new or amended auditor's report with a revised dateCorrect
  3. CIssue a revised report bearing the original date of 20 May 2026 without any further procedures
  4. DWithdraw from the engagement and report to the Income-tax authorities

Explanation

For facts discovered after the report date but before the financial statements are issued, SA 560 requires discussing with management and those charged with governance, determining whether amendment is needed, and if amended, performing necessary procedures and providing a new or amended report. The new report cannot be dated earlier than the approval of the revised statements. Using the original date is wrong, and inaction is not acceptable for a material misstatement.

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