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

Auditor CA Vikram is finalising the audit of Himalaya Pharma Ltd. The financial statements show a material event after year-end disclosed in a note. Management refuses to sign a written representation that it has disclosed all subsequent events requiring adjustment or disclosure. Vikram has otherwise obtained sufficient evidence about subsequent events. Which action is most appropriate under SA 580 principles?

The auditor should discuss the refusal with management, reconsider the reliability of its other representations and its integrity, and take appropriate action, which may include a modified opinion or a disclaimer. Other evidence cannot replace a refused written representation, and backdating the report would be improper.

  1. ATreat the refusal as immaterial because he has other evidence, and issue an unmodified report
  2. BDiscuss with management, reconsider the reliability of its other representations and its integrity, and take appropriate action, which may include modifying the opinion or disclaiming itCorrect
  3. CObtain a representation from the company's bankers instead and treat it as equivalent
  4. DDate the report earlier than the refusal so the issue is not noticed

Explanation

Written representations from management are required evidence. If management refuses to give a requested representation, the auditor discusses the matter, reassesses management's integrity and the reliability of other representations and evidence, and takes appropriate action, including a modified opinion. Other evidence does not replace a refused representation, and backdating the report is improper.

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