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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 half-yearly financial statements of Kaveri Textiles Pvt Ltd under SRE 2400 (Revised). During analytical procedures, the partner finds the accounting records are suspected to be substantially inaccurate and incomplete. What is the most appropriate view of the practitioner?

The practitioner should doubt whether the information needed for the review will be available or reliable, because records required for analytical procedures are suspected to be substantially inaccurate or incomplete, and should consider what this means for continuing the engagement.

  1. AContinue the review, since recommending adjusting entries is never permitted in a review
  2. BDoubt whether the information needed will be available or reliable, and consider the implications for the engagementCorrect
  3. CIgnore the suspicion because review engagements do not use analytical procedures
  4. DConvert the engagement into an audit without informing management

Explanation

SRE 2400 (Revised) gives, as an example of cause to doubt that the information needed will be available or reliable, records needed for analytical procedures being suspected to be substantially inaccurate or incomplete. Option A is wrong because the standard says this consideration is not directed at assisting management with adjusting entries. Analytical procedures are central to a review, so C is wrong.

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