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CA Intermediate · Auditing and Ethics · Audit Documentation

CA Vivek is the auditor of Anand Retail Ltd. In the audit of FY 2025-26, he finds information that is inconsistent with his final conclusion on a significant inventory valuation matter. The valuer's report he had obtained earlier contradicts management's assumptions, yet he accepted management's figures. Which is the correct response under SA 230?

The auditor must document how he addressed the inconsistency between the valuer's report and his final conclusion. SA 230 requires this for information contradicting a conclusion on a significant matter; omitting the report or recording only the conclusion would be improper.

  1. ADocument how he addressed the inconsistency in forming his conclusion, as the documentation must cover such informationCorrect
  2. BExclude the valuer's report from the file since it contradicts the final conclusion
  3. CDocument only the conclusion reached, without mentioning the contradicting information
  4. DDocument the matter only if the management agrees to the disclosure

Explanation

SA 230 requires that if the auditor identifies information inconsistent with his final conclusion on a significant matter, he document how he addressed the inconsistency. Excluding the report or recording only the conclusion would hide contradictory evidence and fail the standard. Management's agreement is irrelevant to the auditor's documentation duty.

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