Narayan & Co. is the statutory auditor of Joy Ltd., a company engaged in the tours and travel business. During the audit of the financial…

As per SA 580, "Written Representations", the auditor shall request management to provide a written representation that it has fulfilled its responsibility for the preparation of the financial statements in accordance with the applicable financial reporting framework, including, where relevant, their fair presentation, as set out in the terms of the audit engagement. Further, the auditor shall request management to provide written representations that: (i) it has provided the auditor 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. In the given case, although the management of Joy Ltd. has provided oral confirmations regarding these matters, such oral confirmations do not substitute the written representations required by SA 580. Accordingly, the contention of Narayan & Co. that formal written representations are required is justified. As per SA 580, the written representations shall ordinarily be in the form of a representation letter addressed to the auditor. However, where law or regulation requires management to make written public statements about its responsibilities, and the auditor determines that such statements provide some or all of the representations required, the relevant matters covered by such statements need not be included in the representation letter. 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, whether 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. Further, the auditor shall disclaim an opinion on the financial statements in accordance with SA 705, 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. Accordingly, the oral confirmations provided by the management of Joy Ltd. cannot, by themselves, replace the written representations required under SA 580. Narayan & Co. should follow the procedures prescribed under SA 580 and consider the consequential effect on the auditor's report if the refusal persists.