Skip to content

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

In reviewing the financial statements of Narmada Textiles Ltd, the practitioner suggests several adjusting entries to finalize the statements, and management books them. The engagement partner asks whether such help conflicts with the engagement's requirements. What is the correct position under SRE 2400 (Revised)?

Recommending adjusting entries to help management finalize the financial statements is a need that sometimes arises in a review. The standard says the concern about unreliable or incomplete records is not directed at it, so such assistance does not by itself prevent the review or a conclusion.

  1. ARecommending adjusting entries is prohibited in any review engagement
  2. BIt is permitted only if the practitioner then converts the engagement into an audit
  3. CThe doubt about availability of reliable information is aimed at inaccurate records, not at the occasional need to assist management by recommending adjusting entries to finalize the statementsCorrect
  4. DAny recommended entry makes the practitioner responsible for preparing the financial statements, so a conclusion cannot be issued

Explanation

The text states that the consideration about records being substantially inaccurate or incomplete is not directed at the need that sometimes arises to assist management by recommending adjusting entries required to finalize the statements. So such help does not by itself undermine the engagement.

Did you get it right without looking?

One question tells you little. A timed set on Review of Financial Information shows your real accuracy, how long you take and where you lose marks.

Practise Review of Financial InformationFree diagnostic mock

More Review of Financial Information questions