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CA Intermediate · Auditing and Ethics · Completion and Review

CA Nikhil is the auditor of Gomti Pharma Ltd. At completion, management refuses to provide a written representation that it has disclosed all known instances of fraud, although it has provided the other representations. Under SA 580, what is the correct response?

The auditor should discuss the refusal with those charged with governance, reevaluate management's integrity and the reliability of the other representations and audit evidence, and take appropriate action, including modifying the opinion under SA 705. Proceeding with an unmodified opinion just because other representations were given would be incorrect.

  1. AAccept the other representations and proceed with an unmodified opinion since only one was refused
  2. BDiscuss with those charged with governance, reevaluate the integrity of management and reliability of other representations and audit evidence, and take appropriate action including modifying the opinion, as per SA 705Correct
  3. CObtain the representation from the company's bankers instead
  4. DTreat the refusal as acceptable if the auditor has found no fraud

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 its effect on reliability of other representations and audit evidence, and take appropriate action, including determining the effect on the opinion under SA 705. A refusal on fraud disclosure raises integrity concerns, so proceeding unchanged is wrong. Bankers cannot substitute for management's representation.

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