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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Reporting on other assignments

Brightwell LLP is performing a review of Orchid Trading's financial statements under ISRE 2400 (Revised). During enquiries the finance director says that sales are recorded when goods are ordered rather than delivered. Which is the most appropriate next step for the practitioner?

The practitioner should perform additional procedures. Under ISRE 2400 (Revised), when something suggests the financial statements may be materially misstated, such as revenue recognised on order rather than delivery, further work must be designed and performed until limited assurance can be obtained or a modified conclusion is considered.

  1. AIgnore the matter because review procedures are limited to enquiry and analytical procedures
  2. BWithdraw immediately, as any departure from the framework prevents a review from continuing
  3. CPerform additional procedures to address the matter, as the practitioner has reason to believe the statements may be materially misstatedCorrect
  4. DIssue a conclusion as normal and mention the matter only in the engagement letter

Explanation

ISRE 2400 requires the practitioner, where aware of matters that cause them to believe the statements may be materially misstated, to design and perform additional procedures to obtain limited assurance. Ignoring it is wrong, and immediate withdrawal is premature. The engagement letter is not a reporting vehicle for findings.

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