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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 Kaveri Textiles Ltd. under SRE 2400 (Revised). While planning analytical procedures, the practitioner finds that the accounting records needed for them are suspected to be substantially inaccurate or incomplete. Which conclusion is most appropriate?

The practitioner has cause to doubt whether the information needed for the review will be available or reliable, because the records required for analytical procedures are suspected to be substantially inaccurate or incomplete. The practitioner must therefore consider the consequences for continuing the engagement rather than proceeding unchanged.

  1. AThe practitioner may have cause to doubt that the information needed for the review will be available or reliable, and must consider the implications for the engagementCorrect
  2. BThe practitioner should proceed unchanged, since reliability of records is relevant only to an audit and not to a review
  3. CThe practitioner should replace analytical procedures with detailed substantive testing of all balances to reach a reasonable assurance opinion
  4. DThe practitioner should issue a qualified conclusion immediately without any further consideration

Explanation

SRE 2400 (Revised) notes that suspected substantial inaccuracy or incompleteness of the records needed for analytical procedures is an example of cause to doubt that the information needed will be available or reliable. This affects whether the review can proceed. Option B is wrong because reliability matters in a review too. Option C is wrong because a review does not provide reasonable assurance.

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