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CA Intermediate · Auditing and Ethics · Completion and Review

During the audit of Himalaya Foods Pvt Ltd, the auditor requests a written representation from management that all related party relationships have been disclosed. Management verbally confirms this but the managing director refuses to sign any written representation letter. All other audit evidence is otherwise satisfactory. Under SA 580, what is the appropriate response?

The auditor should reassess management's integrity and the reliability of other representations and evidence, and consider modifying the opinion, possibly disclaiming it. SA 580 does not allow verbal confirmation to replace requested written representations, and refusal to provide them is a serious matter affecting the audit conclusion.

  1. AAccept the verbal confirmation as sufficient since it is from the managing director
  2. BTreat the verbal confirmation as equal to written representation and issue an unmodified report
  3. CConclude that management's integrity is in doubt, reassess reliability of other representations and evidence, and consider the effect on the opinion including a possible disclaimerCorrect
  4. DRely only on the written representation of the company secretary instead

Explanation

SA 580 requires written representations on matters where management has responsibility. If management refuses to provide requested representations, the auditor discusses it, reevaluates management's integrity and the reliability of other representations and evidence, and takes appropriate action including modifying the opinion, possibly a disclaimer. Verbal confirmation cannot replace the written one.

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