CA Intermediate · Auditing and Ethics · Completion and Review
During the audit of Sundaram Pharma Ltd, the auditor completed fieldwork on 20 May and signed the report on 28 May. On 10 June, before the financial statements were issued, the auditor learnt that a major customer had gone into insolvency, making a receivable of Rs 80 lakh as at 31 March irrecoverable. The auditor's report has already been dated but not yet released. What is the correct response under SA 560?
The auditor should discuss the matter with management and those charged with governance. If the financial statements are amended to reflect the irrecoverable receivable, the auditor should extend procedures to the amendment and issue a new or amended report with a later date, as SA 560 requires for facts known before issue.
- AIgnore the matter as the report date has passed
- BDiscuss with management and those charged with governance, and if the financial statements are amended, perform procedures on the amendment and issue a new or amended report dated laterCorrect
- CMention the matter only in the management representation letter and leave the report unchanged
- DWithdraw from the engagement without any communication
Explanation
Facts becoming known after the report date but before the financial statements are issued require the auditor to discuss the matter with management, determine whether amendment is needed, and if amended, extend procedures and give a new or amended report. Ignoring the matter or relying on a representation letter does not discharge SA 560 responsibilities.
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