Udit & Co. is the statutory auditor of Fun Journey Ltd., a company engaged in the tours and travel business. The company has an annual turnover…

CA Final · Advanced Auditing, Assurance and Professional Ethics · RTP · May 2025
Udit & Co. is the statutory auditor of Fun Journey Ltd., a company engaged in the tours and travel business. The company has an annual turnover of 1,200 crores and profits of 150 crores. While planning, the auditors discussed the requirement for a written representation letter from management for confirming that: (i) The auditor is provided with all relevant information and access as agreed in the terms of the audit engagement; and (ii) All transactions have been recorded and are reflected in the financial statements As the audit was near to completion, the auditor disagreed with the management on one of the matters including need of written representation contending that verbal confirmations given during the audit should be sufficient. Thus, separate written representation is not required. Udit & Co., however, explained that under SA 580 obtaining a formal written statement from management is mandatory. Fun Journey Ltd. refuses to provide a written representation letter, despite the auditor's several requests. (c) How should the auditor proceed if management refuses to provide the written representation?

Suggested Answer and Working Notes:

As per SA 580, if management does not provide one or more of the requested written representations, the auditor shall: (i) Discuss the matter with management; (ii) Re-evaluate the integrity of management and evaluate the effect that this may have on the reliability of representations (oral or written) and audit evidence in general; and (iii) Take appropriate actions, including determining the possible effect on the opinion in the auditor's report in accordance with SA 705 (Revised). Furthermore, the auditor shall disclaim an opinion on the financial statements in accordance with SA 705 (Revised) if the auditor concludes that there is sufficient doubt about the integrity of management such that the written representations required are not reliable or management does not provide the written representations required. Thus, refusal to provide a written representation could impact the auditor's ability to obtain sufficient appropriate audit evidence, potentially leading to a modified audit report.

Topics: Standard on Auditing (SA), CARO 2020

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