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CA Final · Advanced Auditing, Assurance and Professional Ethics · Review of Financial Information

Mehta & Co., Chartered Accountants, are engaged to review the annual financial statements of Kaveri Textiles Pvt Ltd under SRE 2400 (Revised). While planning analytical procedures, the practitioner finds that the accounting records are suspected to be substantially inaccurate and incomplete. What is the most appropriate conclusion?

Where the accounting records needed for analytical procedures are suspected to be substantially inaccurate or incomplete, the practitioner has cause to doubt that the information needed for the review will be available or reliable. This must be considered before proceeding, and a representation letter cannot replace the procedures.

  1. AThe practitioner may have cause to doubt that the information needed for the review will be available or reliable, and should consider this before proceedingCorrect
  2. BThe practitioner should continue and simply rely on management's representation letter in place of analytical procedures
  3. CThe practitioner should convert the engagement into a statutory audit without any further communication
  4. DThe practitioner should issue an unmodified conclusion because review engagements do not depend on the quality of records

Explanation

SRE 2400 (Revised) gives, as an example of cause to doubt that the information needed will be available or reliable, the case where records needed for analytical procedures are suspected to be substantially inaccurate or incomplete. Replacing the procedures with a representation letter ignores this doubt. An unmodified conclusion would not be supportable without reliable information.

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