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

During a review of Sundaram Foods Ltd, the practitioner discovers that the accountant has suggested adjusting entries to help management finalise financial statements. The practitioner has recommended several adjusting entries to correct unrecorded accruals, and management has prepared the statements accordingly. The engagement partner asks whether this recommendation affects the doubt about reliability of information referred to in SRE 2400 (Revised). Which view is correct?

The consideration about whether information needed for the review will be available or reliable is not directed at the occasional need to assist management by recommending adjusting entries required to finalise the financial statements. Such recommendations therefore do not, in themselves, make the information unreliable or force withdrawal.

ARecommending adjusting entries always means the information is unreliable and the engagement must be withdrawn
BThe doubt about availability or reliability of information is not directed at the need that sometimes arises to assist management by recommending adjusting entries needed to finalise the statementsCorrect
CRecommending adjusting entries is prohibited in any review engagement
DRecommending adjusting entries converts the review into an audit

Explanation

SRE 2400 (Revised) clarifies that the consideration of whether information will be available or reliable is not directed at the need that sometimes arises to assist management by recommending adjusting entries to finalise the statements prepared by management. So such assistance does not by itself indicate unreliable information.

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