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

During the audit of Sundaram Textiles Ltd, management's inquiry responses on obsolete stock conflict with the internal audit's responses. The auditor resolves the matter and concludes that the stock provision is adequate. Which documentation step does SA 230 specifically require?

The auditor must document how the inconsistent information was addressed. SA 230 requires specific documentation where information is inconsistent with the auditor's final conclusion on a significant matter, so the conflict between management and internal audit responses cannot simply be left out of the file.

  1. ANo documentation, because the conflict was resolved
  2. BDocumenting how the auditor addressed the information that was inconsistent with the final conclusion on the significant matterCorrect
  3. CDocumenting only the management's version, as it is the client's responsibility
  4. DDestroying the internal audit responses as they are superseded

Explanation

SA 500 notes that inconsistent responses may indicate unreliable evidence, and that SA 230 has a specific requirement when the auditor identifies information inconsistent with the final conclusion on a significant matter. The auditor must document how that inconsistency was addressed. Discarding it or omitting it would break this requirement.

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