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CA Intermediate · Auditing and Ethics · Audit Documentation

In the audit of Ganga Steels Ltd, the engagement team decided that a significant judgement on valuation of a disputed receivable was resolved by relying on management's legal expert. During the audit the partner discussed contradictory information from a lawyer's letter, which the team ultimately concluded was not reliable. Under SA 230, what must the auditor document regarding this inconsistent information?

The auditor must document how the inconsistency with the final conclusion on the significant matter was addressed. SA 230 requires this even if the contradictory information was ultimately rejected as unreliable, so that the file shows the basis for the conclusion reached.

  1. ANothing, since only information supporting the final conclusion needs documenting
  2. BOnly the final conclusion without the inconsistent information
  3. CHow the auditor addressed the inconsistency, even though the information was set asideCorrect
  4. DThe inconsistent information only if management requests it

Explanation

SA 230 requires that if the auditor identifies information inconsistent with the final conclusion on a significant matter, the documentation should record how the inconsistency was addressed. This does not require retaining superseded drafts, but the resolution must be evident. Leaving out contrary information would weaken the support for the conclusion.

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