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

Sharma & Co. is engaged to review the half-yearly financial statements of Kaveri Textiles Ltd under SRE 2400 (Revised). While planning analytical procedures, the practitioner finds that the accounting records are suspected to be substantially inaccurate and incomplete. Which conclusion is most appropriate?

Where records needed for analytical procedures are suspected to be substantially inaccurate or incomplete, the practitioner has cause to doubt that the information required for the review will be available or reliable. The practitioner must therefore consider the implications for continuing the engagement, rather than proceeding as usual.

  1. AThe practitioner may have cause to doubt that the information needed for the review will be available or reliable, and must consider the effect on the engagementCorrect
  2. BThe practitioner should continue the review unchanged, since reliability of records is relevant only to an audit
  3. CThe practitioner should recommend adjusting entries, which is prohibited in a review engagement
  4. DThe practitioner should treat the matter as immaterial because reviews do not use analytical procedures

Explanation

SRE 2400 (Revised) gives suspected substantial inaccuracy or incompleteness of records needed for analytical procedures as an example of cause to doubt that the needed information will be available or reliable. Option B is wrong because reviews rely on such procedures. Option C is wrong because assisting management with adjusting entries to finalise statements is not what this consideration is aimed at.

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