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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Audit procedures and obtaining evidence

During the audit of Halden Retail, management refuses to provide a written representation confirming that it has fulfilled its responsibility for preparing the financial statements in accordance with IFRS. Other audit evidence is satisfactory. What does ISA 580 require?

The auditor should disclaim an opinion. Where management refuses to confirm its responsibilities for the financial statements, ISA 580 treats this as casting doubt on management's integrity, so representations and other evidence become unreliable. Good other evidence, an emphasis paragraph or oral representations do not solve the problem.

  1. ADisclaim an opinion on the financial statements, because management's refusal is serious enough to rule out reliance on its representationsCorrect
  2. BIssue an unmodified opinion because other evidence is satisfactory
  3. CIssue an emphasis of matter paragraph only
  4. DObtain oral representations instead and document them in the audit file

Explanation

Under ISA 580, if management does not provide the representations on its responsibilities for the financial statements and for providing information and complete transactions, the auditor concludes there is sufficient doubt about management's integrity that the evidence is unreliable and disclaims an opinion where practicable. Satisfactory other evidence does not cure this, and oral representations are not a substitute.

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