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CA Intermediate · Auditing and Ethics · Completion and Review

While finalising the audit of Kaveri Textiles Ltd, the engagement partner notes that the audit team found that management had not provided a written representation on the completeness of related party disclosures, although all other representations were received. Management says it has orally confirmed the position. What is the most appropriate response of the auditor under SA 580?

The auditor should insist on the written representation, and if management still refuses, discuss it with those charged with governance and consider the impact on the opinion. Under SA 580 oral confirmation cannot replace a required written representation, and refusal raises doubts about management integrity and may lead to a modified opinion.

  1. AAccept the oral confirmation as sufficient because representations are not audit evidence
  2. BTreat the oral confirmation as sufficient only if the audit committee chairman also agrees
  3. CRequest the written representation, and if it is not provided, discuss with those charged with governance and consider the effect on the audit opinionCorrect
  4. DIgnore the matter because related party disclosures are the auditor's responsibility alone

Explanation

SA 580 requires written representations on matters it specifies, and oral representations are not a substitute. If management refuses to provide them, the auditor discusses the matter with those charged with governance, reassesses management integrity and considers the effect on the opinion, including modification. Accepting oral confirmation fails the requirement for written form.

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