ACCA Strategic Professional · Advanced Audit and Assurance (International) · Completion and final review
Delta Co's auditor has read the other information and considers that, although it is consistent with the financial statements, it contradicts knowledge gained in the audit: the strategy review says no customers have been lost, yet the auditor saw evidence of two major customers terminating contracts. How should the auditor first respond under ISA 720 (Revised)?
The auditor should discuss the inconsistency with management and perform further procedures to establish whether the other information is misstated or the auditor's own knowledge needs updating. Inconsistency with audit knowledge is within ISA 720 (Revised), and it does not automatically lead to an adverse opinion.
- ADiscuss the matter with management, and perform further procedures to resolve whether the other information or the auditor's knowledge is misstatedCorrect
- BImmediately issue an adverse opinion on the financial statements
- CReport the matter only to the regulator without discussing it with the client
- DIgnore it because only inconsistencies with the financial statements count
Explanation
ISA 720 (Revised) requires the auditor to consider inconsistency with knowledge obtained in the audit as well as the financial statements. The auditor discusses with management and performs further procedures to determine whether the other information or the auditor's understanding is wrong; option D is wrong since knowledge is within scope.
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