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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Completion and final review

Auditors of Bluebell Services are concerned that the finance director, who has signed the representation letter in previous years, has been involved in a suspected misstatement this year. Under ISA 580, which action is most appropriate?

The auditor should doubt the reliability of representations from that individual, reconsider management integrity, consider obtaining representations from others with relevant responsibility, and assess the effect on the opinion. Integrity concerns reduce reliance on representations and on other evidence from the same source.

  1. AAccept the finance director's signature since the role is unchanged
  2. BDoubt the reliability of representations from this individual, reconsider the integrity concerns, and consider requesting representations from others, with potential effects on the opinionCorrect
  3. CObtain representations only from the junior accountant
  4. DSkip the representation letter and rely on analytical procedures

Explanation

ISA 580 requires the auditor to consider concerns about the competence, integrity, ethical values or diligence of management, and the effect these concerns may have on the reliability of representations and audit evidence in general. Where such concerns exist, the auditor should consider representations from others and the effect on the opinion. Simply accepting the signature ignores the concern.

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