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CA Final · Advanced Auditing, Assurance and Professional Ethics · Review of Financial Information

During a review of Kaveri Foods Ltd's financial statements, the practitioner finds that the draft statements need a few adjusting entries, which the practitioner suggests to management so that management can finalize the statements. The audit committee asks whether this advice conflicts with the information-reliability consideration in SRE 2400 (Revised). Which conclusion is correct?

The consideration about doubting the reliability of information is not aimed at the occasional need to assist management by recommending adjusting entries required to finalize the financial statements prepared by management. So suggesting a few adjustments does not conflict with the standard or force withdrawal.

  1. AThe advice is prohibited because any recommendation of adjusting entries ends the review engagement
  2. BThe advice is permitted only if the practitioner also prepares the whole ledger
  3. CThe consideration about doubting reliability of information is not directed at the need that sometimes arises to assist management by recommending adjusting entries required to finalize the statementsCorrect
  4. DThe advice proves that the accounting records are substantially inaccurate, so the practitioner must withdraw

Explanation

The text states that the doubt about availability or reliability of information is not directed at the occasional need to assist management by recommending adjusting entries to finalize the statements prepared by management. Hence suggesting entries does not by itself end the engagement or imply withdrawal.

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