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CA Intermediate · Auditing and Ethics · Audit Documentation

During the audit of Himalaya Pharma Ltd, the auditor and management disagreed on the valuation of a major intangible asset. The auditor resolved the matter after consulting an expert and reached a conclusion different from his initial view. How should the auditor document this under SA 230?

The auditor should document how the inconsistency was addressed, including the information that conflicted with the final conclusion. SA 230 requires this for significant matters so a reviewer can understand how the conclusion was reached; earlier papers must not be removed.

  1. ADocument only the final conclusion, since earlier views are superseded and irrelevant to the file
  2. BDocument how the auditor addressed the inconsistency, including the information that was inconsistent with the final conclusionCorrect
  3. CRemove all earlier working papers reflecting the initial view to avoid confusing the reviewer
  4. DDocument it only in the management representation letter and not in the audit file

Explanation

SA 230 requires that if the auditor identifies information inconsistent with the final conclusion on a significant matter, the documentation must record how the inconsistency was addressed. Retaining only the final conclusion fails this. Removing papers would breach the documentation requirement and cannot be justified.

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