ACCA Strategic Professional · Advanced Audit and Assurance (International) · Completion and final review
During the audit of Karoo Co, the auditor reads the other information and identifies what appears to be a material inconsistency: the directors' report states that profit grew by 20%, whereas the audited financial statements show growth of 8%. Management refuses to correct the directors' report. Which action is most appropriate under ISA 720 (Revised)?
The auditor should discuss the matter with management, ask for correction, and if it stays uncorrected, raise it with those charged with governance and describe the material misstatement in the Other Information section of the auditor's report. The opinion on the financial statements is not modified for it.
- AIgnore the matter because other information is outside the scope of the audit opinion
- BWithdraw immediately from the engagement without any further consideration
- CIssue a qualified opinion on the financial statements because of the inconsistency in the directors' report
- DDiscuss with management, and if the misstatement remains uncorrected, communicate with those charged with governance and consider the effect on the auditor's report, including a Other Information section describing itCorrect
Explanation
The auditor first discusses with management, requests correction, and if uncorrected communicates with those charged with governance and describes the uncorrected material misstatement in the Other Information section. The financial statements opinion is not modified solely because of the other information, so option C is wrong.
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