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

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

The practitioner may have cause to doubt that the information needed for the review will be available or reliable when accounting records needed for analytical procedures are suspected to be substantially inaccurate or incomplete. She must therefore consider the consequences for the engagement rather than continuing as if nothing happened.

  1. AShe 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. BShe should continue unchanged, because recommending adjusting entries is prohibited in a review
  3. CShe should treat the matter as a trivial issue because review engagements do not rely on analytical procedures
  4. DShe should issue a qualified conclusion immediately without further enquiry

Explanation

SRE 2400 (Revised) gives, as an example of doubt over availability or reliability of information, a case where records needed for analytical procedures are suspected to be substantially inaccurate or incomplete. Option B is wrong because assisting management with adjusting entries is not the concern. Option C is wrong because analytical procedures are central to a review.

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