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ACCA Applied Skills · Corporate and Business Law (Global) · Other company officers

While auditing Kestrel Ltd, the auditor, Mara, finds that the company's accounting records are inadequate and that she has not received all the information and explanations she needs. What is the effect on her duties?

Mara must state the deficiency in her audit report. Auditors have a duty to report by exception when adequate accounting records have not been kept or when necessary information and explanations have not been received, even if the figures look reasonable.

  1. AShe must state this in her audit report, because the audit report must say when proper records have not been kept or information has been withheldCorrect
  2. BShe must resign immediately and issue no report
  3. CShe may ignore the matter as long as the figures in the accounts appear reasonable

Explanation

An auditor has a duty to report by exception where adequate accounting records have not been kept or where she has not obtained the information and explanations needed. Resignation is not required, and apparently reasonable figures do not remove the duty to report the deficiency.

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