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ACCA Applied Skills · Corporate and Business Law (Global) · Other company officers

Marlow plc's auditor is reviewing the draft accounts and finds that the company's accounting records are inadequate and that she has not received all the information she needs. What must the auditor do?

The auditor must state the problem in the audit report by exception. Auditors have a duty to report where accounting records are inadequate or information and explanations were not received, so staying silent or merely resigning would not discharge it.

  1. ASay nothing, because adequacy of records is the directors' concern only
  2. BReport the matter in the audit report by exceptionCorrect
  3. CResign immediately without reporting
  4. DAsk the directors to amend the audit opinion

Explanation

Auditors must report by exception where proper accounting records have not been kept, the accounts do not agree with the records, or necessary information and explanations were not obtained. Silence would breach the duty. Resigning without reporting avoids it, and the audit opinion is the auditor's own, not the directors'.

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