CA Final · Advanced Auditing, Assurance and Professional Ethics · Audit Evidence
Auditor of Bharat Steels Ltd decided that a positive confirmation response from a major customer, Delta Infra Ltd, was necessary to obtain sufficient appropriate audit evidence, since the balance is material and the fraud risk is significant. Delta did not reply despite follow-up. The auditor plans to verify subsequent receipts and dispatch documents instead and conclude the work is complete. What is the correct action under SA 505?
The auditor must determine the implications for the audit and the opinion under SA 705 (Revised). Because the response was necessary for sufficient appropriate evidence, alternative audit procedures will not provide the evidence required, so subsequent receipts testing cannot replace the missing confirmation.
- AAlternative procedures are adequate, so no further implication arises
- BAlternative procedures will not provide the required evidence; the auditor determines the implications for the audit and opinion under SA 705 (Revised)Correct
- CObtain a management representation and treat the balance as confirmed
- DWithdraw from the engagement automatically
Explanation
Where a response to a positive confirmation is necessary for sufficient appropriate evidence, alternative procedures will not provide the evidence required. Failing to get it, the auditor determines the implications for the audit and opinion per SA 705 (Revised). Option A is the distractor assuming alternative procedures substitute.
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