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CA Intermediate · Auditing and Ethics · Completion and Review

Mehta & Associates is auditing Sagar Foods Ltd. Management has not provided a written representation confirming that it has fulfilled its responsibility for the preparation of the financial statements, despite repeated requests. Other audit evidence is satisfactory. Under SA 580, what is the appropriate audit response?

The auditor should discuss the matter with those charged with governance, reconsider management's integrity, and disclaim an opinion or withdraw where permitted. Refusal to give written representations on management's responsibilities undermines the reliability of all other representations, so an unmodified opinion or a mere qualification is inadequate.

  1. AIssue an unmodified opinion, as oral confirmation from the CFO is acceptable evidence
  2. BDisclaim an opinion or withdraw from the engagement, after discussing with those charged with governance, because management's integrity is in doubtCorrect
  3. CIssue a qualified opinion limited to the specific items on which representations are missing
  4. DIssue an unmodified opinion with an Emphasis of Matter paragraph about the missing representation

Explanation

If management does not provide the representations about its responsibilities for the financial statements and for completeness of information, SA 580 treats this as raising doubt about integrity and an inability to rely on other representations. The auditor must discuss the matter with those charged with governance, reconsider integrity, and disclaim an opinion (or withdraw where possible). A qualification is not appropriate because the effect is pervasive.

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