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

Sharma & Co, chartered accountants, are engaged to review the annual financial statements of Vihaan Textiles Pvt Ltd under SRE 2400 (Revised). While planning analytical procedures, the practitioner finds the accounting records were maintained poorly, with several months of stock and sales ledgers missing or suspected to be substantially inaccurate. What is the most appropriate view of the practitioner?

The practitioner may have cause to doubt that the information needed for the review will be available or reliable, because accounting records required for analytical procedures are suspected to be substantially inaccurate or incomplete. The implications for continuing the engagement must therefore be considered rather than ignored.

  1. AThe practitioner may have cause to doubt that the information needed for the review will be available or reliable, and should consider the implications for the engagementCorrect
  2. BThe practitioner should proceed normally, since a review does not rely on accounting records
  3. CThe practitioner should convert the engagement into an audit and issue a positive opinion
  4. DThe practitioner should record the missing entries personally and treat this as evidence that the records are reliable

Explanation

The official text gives, as an example of doubt about availability or reliability of information, accounting records needed for analytical procedures being suspected to be substantially inaccurate or incomplete. The practitioner should therefore consider the effect on the engagement. Proceeding as normal ignores this, and simply writing up records does not make them reliable.

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