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CA Final · Advanced Auditing, Assurance and Professional Ethics · Completion and Review

During the audit of Anand Retail Ltd, the auditor requested a written representation on management's responsibility for the financial statements. Management orally confirmed it but declined to sign, and management also says the representation letter is unnecessary. What is the most appropriate auditor view under the principles of SA 580?

The auditor should treat the refusal as a serious matter: discuss it with management, reassess management's integrity and the reliability of other representations, and consider the effect on the opinion, possibly disclaiming it. Oral confirmation cannot replace the required written representations, and size of entity does not matter.

  1. AOral confirmation is sufficient audit evidence in place of the written representation
  2. BRepresentation on responsibility for the financial statements is optional for small entities
  3. CThe auditor can ignore the refusal if other evidence is available
  4. DRefusal to provide the requested representations creates doubt about management's integrity and the auditor should discuss it and consider its effect on reliance on other representations and on the opinionCorrect

Explanation

Oral statements are no substitute for the required written representations. Refusal of a requested representation on management's responsibilities raises concerns about integrity and the reliability of other representations. The auditor must discuss it with management and reassess the effect on the audit and the opinion, which may include disclaiming an opinion. The SA applies to all entities regardless of size.

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