As auditor of Kite Limited, you have sent positive confirmation requests to 49 creditors of the company in March 2025. All the creditors in the…

SA 505, "External Confirmations", states that if the auditor determines that a response to a confirmation request is not reliable, the auditor shall evaluate the implications on the assessment of the relevant risks of material misstatement, including the risk of fraud, and on the related nature, timing and extent of other audit procedures. In the instant case, GST registrations of 42 concerns have been cancelled in the year 2024-25. It indicates that businesses at those addresses were closed. Further, there are no fresh registrations pertaining to the PANs of these parties. However, the auditor sent external confirmation requests in March 2025, which were duly responded. It raises questions on the reliability of responses received. SA 500, "Audit Evidence" indicates that even when audit evidence is obtained from sources external to the entity, circumstances may exist that affect its reliability. All responses carry some risk of interception, alteration or fraud. Such risk exists regardless of whether a response is obtained in paper form or by electronic or other medium. Factors that may indicate doubts about the reliability of a response include: Was received by the auditor indirectly orAppeared not to come from the originally intended confirming party. Keeping in view the circumstances described in the given situation, there is a risk that the response has not come from the originally intended confirming party. Unreliable responses may indicate a fraud risk factor that requires evaluation. Since the confirmations from 42 creditors may not be reliable, the auditor must obtain additional audit evidence to address those concerns and reassess the risk of material misstatement, including the possibility of fraud, and accordingly perform further audit procedures as required by SA 505, SA 500 and SA 240.