CA Final · Advanced Auditing, Assurance and Professional Ethics · Audit Evidence
CA Tanvi is auditing Ganga Steels Ltd. A positive confirmation of a Rs 2.4 crore balance from the company's largest debtor is judged necessary to obtain sufficient appropriate evidence, as no other procedure can provide the required evidence. Despite two follow-ups, no reply is received. The finance head offers to supply the debtor's acknowledgement letter held by the company. What should Tanvi do?
Tanvi should determine the implications for the audit and her opinion in accordance with SA 705 (Revised). When a positive confirmation response is necessary, alternative procedures cannot supply the required evidence, and a letter held by the company is not equivalent to a reply received directly from the debtor.
- AAccept the company-held letter as equivalent, since it bears the debtor's signature
- BTreat the nonresponse as immaterial and rely on subsequent receipts alone
- CDetermine the implications for the audit and the auditor's opinion under SA 705 (Revised), as alternative procedures will not give the evidence requiredCorrect
- DWithdraw from the engagement immediately without considering the opinion
Explanation
Where a response to a positive confirmation request is necessary to obtain sufficient appropriate evidence, alternative procedures will not provide the evidence required. If no confirmation is obtained, the auditor determines the implications for the audit and the opinion per SA 705 (Revised). The letter held by the company is not obtained directly by the auditor from an independent source, so it cannot substitute.
Did you get it right without looking?
One question tells you little. A timed set on Audit Evidence shows your real accuracy, how long you take and where you lose marks.
More Audit Evidence questions
- The auditor of Shreeji Pharma Ltd inquired of the finance head whether bank reconciliation controls operated throughout the year. The financ…
- Auditor CA Iyer has gathered a large volume of internal schedules for the inventory of Bharat Plastics Ltd, but these are of poor quality as…
- During the audit of Deccan Steels Ltd, CA Vikram finds the sales ledger entries are supported only by a few low-quality, photocopied dispatc…
- While auditing Kaveri Textiles Ltd, the auditor must choose between two pieces of evidence for the existence of a large receivable from a cu…
- While auditing Kaveri Textiles Ltd, the auditor must choose between two pieces of evidence for the existence of a large fixed deposit: (i) t…
- While auditing Kaveri Textiles Ltd, CA Ritu must decide which evidence on the existence of trade receivables is most reliable. She has (i) t…