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CA Intermediate · Auditing and Ethics · Audit Documentation

During the audit of Raghav Steels Ltd, CA Isha finds that management's valuation of unlisted investments conflicts with a valuer's report she obtained. After discussion she concludes that management's value is acceptable and the other report is not reliable. Under SA 230, what must she document?

She must document how she addressed the inconsistent information relating to the significant matter. SA 230 requires the auditor to record how any contradiction with the final conclusion was resolved, rather than ignoring the valuer's report or relying only on an oral discussion.

  1. AHow she addressed the inconsistency, since she must document her conclusion on information that is inconsistent with her final conclusion on the significant matterCorrect
  2. BNothing about the inconsistent valuer's report, since only the supporting evidence for the final conclusion is needed
  3. COnly the valuer's report, and the discussion with management can be left out
  4. DOnly an oral note to the engagement partner, as written documentation is needed only for confirmed misstatements

Explanation

SA 230 says that if the auditor identifies information inconsistent with the final conclusion on a significant matter, the auditor documents how the inconsistency was addressed. The auditor is not required to retain superseded or incorrect drafts, but must record the resolution of contradictory information. Omitting it or giving only an oral note fails the requirement.

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