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CA Intermediate · Auditing and Ethics · Completion and Review

In the audit of Ganga Steels Ltd, the auditor requested written representations from management. Management has provided all except the one confirming that it has fulfilled its responsibility for preparing the financial statements. Management says the auditor can rely on oral assurances. What is the auditor's appropriate response under SA 580?

The auditor should treat the refusal as an integrity concern, reconsider the reliability of other representations and, since the representation on management's responsibilities is essential, disclaim an opinion. Oral assurances are not a substitute for the required written representations under SA 580.

  1. AAccept oral assurances as they are equally reliable
  2. BRely on the audit committee's minutes and issue an unmodified opinion
  3. CTreat the refusal as a matter of integrity concern, consider the effect on reliance on other representations, and disclaim an opinion if the required representation on management's responsibilities is not providedCorrect
  4. DIssue a qualified opinion only for inventory

Explanation

Under SA 580, if management does not provide the representations about its responsibilities for the financial statements, the auditor discusses the matter, reconsiders management's integrity and reliability of other representations, and takes appropriate action including disclaiming an opinion. Oral assurances cannot replace the required written representations, and a limited qualification for one area does not address the pervasive concern.

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