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CA Final · Advanced Auditing, Assurance and Professional Ethics · Review of Financial Information

During the review of Nalanda Foods Ltd's financial statements, the practitioner Suresh finds that management has prepared the draft statements with some errors. Suresh recommends adjusting entries to management so that the statements can be finalised. A junior argues that this assistance itself shows the information needed for the review is unreliable. Which view is correct under SRE 2400 (Revised)?

Recommending adjusting entries does not by itself indicate unreliable information. SRE 2400 (Revised) says the doubt consideration is not directed at the need that sometimes arises in a review to assist management by recommending adjusting entries required to finalise the financial statements prepared by management.

  1. ARecommending adjusting entries automatically means the practitioner must withdraw from the engagement
  2. BRecommending adjusting entries is permitted only if the practitioner also posts them in the books
  3. CThe doubt about availability or reliability of information is not directed at the need that sometimes arises to assist management by recommending adjusting entries to finalise the statements prepared by managementCorrect
  4. DRecommending adjusting entries is prohibited because it impairs the review conclusion in every case

Explanation

The text states that the consideration about doubting the availability or reliability of information is not directed at the need that sometimes arises during a review to assist management by recommending adjusting entries required to finalise management's statements. So the junior is wrong. The other options invent withdrawal, posting or prohibition rules not found in the text.

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