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CMA Intermediate · Corporate Accounting and Auditing · Audit Engagement, Audit Program, Audit Documentation and Audit Evidence

During the audit of Kaveri Foods Ltd, management's inquiry responses about an inventory write-down are inconsistent with the responses of those charged with governance, which were sought to corroborate management's answers. Which statement is consistent with SA 500 and the referenced SA 230?

Inconsistent responses from management and those charged with governance may indicate that an item of audit evidence is unreliable. SA 230 also requires documentation where the auditor identifies information inconsistent with the final conclusion on a significant matter.

  1. AThe inconsistency may indicate that an item of audit evidence is not reliable, and SA 230 requires documentation if information inconsistent with the auditor's final conclusion on a significant matter is identifiedCorrect
  2. BThe governance response is always preferred and no documentation is needed
  3. CInconsistency is irrelevant if the figures reconcile to the ledger
  4. DThe auditor should ignore both responses and rely only on prior-year evidence

Explanation

SA 500 states that evidence from different sources that is inconsistent may indicate an item of evidence is unreliable, including inconsistent responses to inquiries of management and those charged with governance. SA 230 has a specific documentation requirement where information inconsistent with the final conclusion on a significant matter is identified. The other options ignore this.

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