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CA Intermediate · Auditing and Ethics · Audit Documentation

While auditing Raghav Steels Ltd., CA Nisha finds that management's written representation on the completeness of related party transactions contradicts the details in the board minutes she inspected. She resolves the inconsistency by obtaining further explanations and evidence from the CFO. According to SA 230, how should she deal with this in documentation?

She should document how she addressed the inconsistency. SA 230 requires the file to show how information inconsistent with her final conclusion on a significant matter was resolved, rather than hiding it or recording only the final conclusion.

  1. ADocument how she addressed the inconsistency in the informationCorrect
  2. BOmit the contradictory minutes from the file since the matter is resolved
  3. CRecord only the final conclusion, leaving out the contradictory information
  4. DDocument it only if the inconsistency is later reported by the client's audit committee

Explanation

SA 230 requires that if the auditor identified information inconsistent with the auditor's final conclusion on a significant matter, the auditor documents how the inconsistency was addressed. This does not mean the contradictory material is excluded. Leaving out the minutes or the inconsistency would defeat the purpose of documentation, which is to show the basis for the conclusion.

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