CA Intermediate · Auditing and Ethics · Completion and Review
CA Meera is the auditor of Surya Pharma Ltd. Management refuses to give a written representation that it has disclosed all known instances of non-compliance with laws, though it has given all other representations. Meera finds the other representations reliable. What is the correct audit response under SA 580?
The auditor should discuss the refusal with management and those charged with governance, reassess management's integrity and the reliability of other representations and evidence, and consider the effect on the audit opinion. Under SA 580 oral assurance cannot replace the requested written representation.
- AAccept oral confirmation and issue an unmodified report
- BDiscuss the matter with management and those charged with governance, reassess the integrity of management and its effect on the reliability of representations and other evidence, and consider the effect on the opinionCorrect
- CTreat the refusal as a matter that has no effect since other representations were given
- DResign immediately without discussing it with anyone
Explanation
If management does not provide a requested representation, SA 580 requires the auditor to discuss with management and those charged with governance, reevaluate management's integrity and the reliability of other representations and audit evidence, and take appropriate actions including the effect on the opinion. Oral confirmation does not substitute for the written representation requested. Immediate resignation without such steps is not the prescribed first response.
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