ACCA Strategic Professional · Advanced Audit and Assurance (International) · Laws and regulations
Delmar Pharma Ltd's auditor identifies a suspected breach of tax legislation that has an immaterial effect on the financial statements. Management has agreed to correct it. Which statement best reflects the auditor's responsibilities?
Even an immaterial breach must be evaluated for its wider implications, including effects on the auditor's risk assessment and on the reliability of management's representations, because it may indicate integrity or control problems. It does not automatically require withdrawal or mention in the auditor's report.
- ANo further consideration is needed because the amount is immaterial
- BThe auditor must always withdraw from the audit
- CThe auditor must still evaluate the implications for other aspects of the audit, such as risk assessment and the reliability of management representationsCorrect
- DThe auditor must report the breach to the shareholders in the auditor's report
Explanation
ISA 250 (Revised) requires the auditor to evaluate the implications of identified or suspected non-compliance for other aspects of the audit, including risk assessment and the reliability of written representations, even when the effect on the financial statements is immaterial. Withdrawal is only considered when the non-compliance is serious and management does not remediate it. A report in the auditor's report is required only where there is a modified opinion or a legal duty to do so.
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