While scrutinising the accounts of XY Ltd., CA Q, the auditor of XY Ltd., observed that the company had a significant amount of trade receivables…

As per SA 505, “External Confirmations”, if management refuses to allow the auditor to send a confirmation request, the auditor shall: (i) Inquire as to management's reasons for the refusal and seek audit evidence as to their validity and reasonableness; (ii) Evaluate the implications of management's refusal on the auditor's assessment of the relevant risks of material misstatement, including the risk of fraud, and on the nature, timing and extent of other audit procedures; and (iii) Perform alternative audit procedures designed to obtain relevant and reliable audit evidence. If the auditor concludes that management's refusal to allow the auditor to send a confirmation request is unreasonable or the auditor is unable to obtain relevant and reliable audit evidence from alternative audit procedures, the auditor shall communicate with those charged with governance in accordance with SA 260. The auditor shall also determine the implications for the audit and the auditor's opinion in accordance with SA 705. In the given case, CA Q wants to send external confirmation requests to selected trade receivables but the management of XY Ltd. refused the same. Thus, CA Q shall take above actions.