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CA Intermediate · Auditing and Ethics · Audit Documentation

Auditor Iyer discovers during the audit of Anand Motors Ltd. that the client management gave a representation about related party transactions that contradicts other audit evidence. Which documentation response is required under SA 230 and related standards?

The auditor must document how the inconsistent information was addressed, including further procedures performed and the conclusion reached. Deleting the representation or recording only management's version would not satisfy SA 230, which requires inconsistencies on significant matters to be dealt with transparently.

  1. ADocument how the inconsistency was addressed, including the further procedures performed and the conclusion reachedCorrect
  2. BDelete the management representation from the file to avoid confusion
  3. CRecord only the management representation since it is written evidence
  4. DLeave the inconsistency undocumented if it is immaterial to the client

Explanation

SA 230 requires documentation of how the auditor addressed information that is inconsistent with the auditor's final conclusion on a significant matter. Deleting or ignoring the inconsistency is not allowed, and recording only the representation hides the conflicting evidence. The decision on materiality must itself be supported by documentation.

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