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CA Final · Advanced Auditing, Assurance and Professional Ethics · Related Services

The lenders of Tara Textiles Ltd. request CA Imran, who is not the company's statutory auditor, to perform specific procedures on trade receivables and to report the factual findings. The procedures are agreed among Imran, the company and the lenders. Under SRS 4400, which conclusion is correct?

Imran may accept the engagement. SRS 4400 uses the term auditor without implying that the person performing agreed-upon procedures must be the auditor of the entity's financial statements, so a non-statutory auditor can undertake it and report findings on the agreed procedures.

  1. AImran cannot accept the engagement because only the statutory auditor may perform agreed-upon procedures
  2. BImran may accept it, since the term auditor in SRS 4400 does not imply that the person performing the related service must be the auditor of the entity's financial statementsCorrect
  3. CImran must convert the engagement into an audit of receivables and give an opinion
  4. DImran must give negative assurance on the receivables balance

Explanation

The footnote to SRS 4400 states that the term auditor is used when describing agreed-upon procedures services, and that this does not imply the person performing them need be the entity's financial statements auditor. The engagement reports factual findings, not assurance. Hence the statutory-auditor-only view is wrong.

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