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CA Intermediate · Auditing and Ethics · Audit Documentation

During the audit of Bharat Steel Ltd, the auditor identifies that inventory records are inconsistent with the physical count sheets. Management later explains the difference as a cut-off error and provides a revised sheet. The auditor concludes the explanation is acceptable. Under SA 230, what should the auditor document about this inconsistency?

The auditor must document how the inconsistency was addressed, including what was found, the procedures done on management's explanation, and the conclusion reached. Leaving it undocumented or discarding the original count sheets would break the audit trail required by SA 230.

  1. AHow the auditor addressed the inconsistency, including the revised sheet and the conclusion reachedCorrect
  2. BNothing, since the matter was resolved
  3. COnly the revised sheet, discarding the original count sheets
  4. DOnly management's oral explanation in the management representation letter

Explanation

SA 230 requires documenting how the auditor addressed information that is inconsistent with the auditor's final conclusion regarding a significant matter. Hence the original inconsistency, the explanation, procedures to check it and the conclusion should be recorded. Not documenting it or discarding the original loses the audit trail.

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