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CA Final · Advanced Auditing, Assurance and Professional Ethics · Review of Financial Information

While reviewing the financial statements of Ganga Foods Ltd, the practitioner set materiality at ₹8 lakh. During the review she learns of a large pending customer litigation that would have led her to set a lower materiality initially. What should she do under SRE 2400 (Revised)?

She must revise materiality for the financial statements as a whole. SRE 2400 (Revised) requires revision when the practitioner becomes aware during the review of information that would have caused a different amount to be determined at the outset.

  1. ARetain the original materiality to keep the engagement consistent
  2. BRevise materiality for the financial statements as a whole, since she became aware of information that would have led to a different amount initiallyCorrect
  3. CRevise materiality only if management agrees to the change
  4. DRevise materiality only after issuing the review report

Explanation

The standard requires the practitioner to revise materiality for the financial statements as a whole on becoming aware of information during the review that would have caused a different amount to be determined initially. It is not subject to management's consent or deferred to after reporting.

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