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CA Intermediate · Auditing and Ethics · Completion and Review

During the audit of Sundaram Engineering Ltd, the auditor requests a written representation from management about completeness of related party disclosures. Management verbally confirms but refuses to give the written representation. Under SA 580, what is the auditor's correct response?

The auditor should discuss the refusal with management, reevaluate management's integrity and the reliability of other evidence, and modify the opinion as appropriate, including a disclaimer where key representations are withheld, since verbal confirmation cannot replace written representations under SA 580.

  1. AAccept the verbal confirmation as equal to written representation
  2. BDiscuss with management, reevaluate their integrity and the reliability of other evidence, take appropriate action including the effect on the opinion, and if the refusal relates to key representations disclaim an opinionCorrect
  3. CIssue an unmodified opinion because representations are not audit evidence
  4. DResign immediately without any other step

Explanation

If management does not provide requested representations, SA 580 requires the auditor to discuss the matter, reevaluate management's integrity, and take appropriate action including modifying the opinion. A disclaimer is required where integrity doubts are serious or representations are not provided on key matters. Verbal confirmation does not replace written representation.

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