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CA Final · Advanced Auditing, Assurance and Professional Ethics · Completion and Review

The auditor of Narmada Pharma Ltd has completed the audit and the financial statements are approved. After approval, the auditor learns that management cannot be relied upon and has doubts about the integrity of the written representations. Which statement best reflects the auditor's course under SA 580?

The auditor must reconsider the reliability of management's representations because doubts about integrity affect both oral and written representations. If the doubts are serious, the auditor may have to disclaim an opinion. Merely obtaining fresh representations from the same management does not resolve the concern.

  1. AObtain a fresh written representation from the same management and proceed as before
  2. BProceed on the basis of other audit evidence alone, since representations are never necessary
  3. CTreat management's integrity concerns as irrelevant if the amounts are small
  4. DReconsider the reliability of management's representations, since concerns about integrity affect the reliability of oral and written representations and may lead to disclaimer of opinionCorrect

Explanation

SA 580 deals with the effect of doubts on management's competence, integrity, ethical values or diligence, which can make representations unreliable. In that case the auditor reconsiders reliability and may disclaim an opinion. Simply obtaining another representation from the same management does not resolve the doubts.

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