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CA Final · Advanced Auditing, Assurance and Professional Ethics · Completion and Review

Mehta & Associates audits Sundaram Engineering Ltd. Management refuses to amend the financial statements for a material subsequent event that occurred after the auditor's report was issued but before the AGM, and the auditor believes the statements need amendment. The auditor had notified those charged with governance earlier. Which course is most consistent with SA 560?

The auditor should take appropriate action to seek to prevent future reliance on the issued report, after notifying management and those charged with governance. Inaction or reissuing the old report without addressing the event would leave users relying on misleading financial statements.

  1. ADo nothing since the report has already been issued
  2. BWithdraw the report and ask the company secretary to hold the AGM
  3. CTake action to prevent reliance on the auditor's report, after notifying those charged with governance, if management does not take the necessary stepsCorrect
  4. DIssue a fresh report with the original date and no mention of the event

Explanation

Where management does not amend the statements and the auditor believes they need amendment, the auditor, having notified management and those charged with governance, must take appropriate action to seek to prevent reliance on the report. Doing nothing or silently reissuing the old report ignores the known fact.

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