03 C3 Audit Documentation and Audit Evidence

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What are the factors
factors that are to be considered
considered while designing a confirmation request? (8 Marks)
As per SA -505 "External Confirmations", the design of a confirmation request may directly affect the confirmation
response rate, and the reliability and the nature of the audit evidence obtained from responses.
The following factors should be considered while designing a confirmation request: -

a. The assertions being addressed.
b. Specific identified risks of material misstatement, including fraud risks.
c. The layout and presentation of the confirmation request.
d. Prior experience on the audit or similar engagements.
e. The method of communication (कैसे बताए )
f. Management's authorisation to the confirming parties to respond to the auditor. Confirming parties may
only be willing to respond to a confirmation request containing management's authorisation. ( य तझ ु को
चाह)
चाह
g. The ability of the confirming party to provide the requested information (यारा बता ना पाए – ability)

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SA 580 - WRITTEN REPRESENTATIONS

What do you mean by "Written Representations"? As an auditor, how you will deal if management does not provide
requested written representations?


Answer
Written Representations: As per SA 580, "Written Representation", is a written statement by management provided
to the auditor to confirm certain matters or to support other audit evidence.These representations are an important source
of audit evidence.

If management modifies or does not provide the requested written representations, it may alert the auditor to the
possibility that one or more significant issues may exist.

Requested Written Representations not provided by Management: If management does not provide one or more
of the requested written representations,

● the auditor shall discuss the matter with management;
● 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
● take appropriate actions, including determining the possible effect on the opinion in the auditor's report.

The auditor shall disclaim an opinion on the financial statements if management does not provide the written
representations.
From Whom
Auditor shall request written representations from management with appropriate responsibilities for the financial
statements and knowledge of the matters concerned.


People from whom written representation is to be requested may vary depending on the governance structure of
the entity,a and relevant law or regulations; however, management (rather than TCWG) is often the responsible
party.
Written representations may therefore be requested from the entity’s CEO and CFO, or other equivalent persons in
entities that do not use such titles. In some circumstances , however, other parties, such as TCWG , are also
responsible for the preparation and presentation of the financial statements.


Miscellaneous Topic - SA 500

Management’s expert – An individual or organisation possessing expertise in a field other than accounting or
auditing, whose work in that field is used by the entity to assist the entity in preparing the financial statements.
When information to be used as audit evidence has been prepared using the work of a management’s expert, the
auditor shall, to the extent necessary, having regard to the significance of that expert’s work for the auditor’s
purposes,:
● Evaluate the competence, capabilities and objectivity of that expert;

● Obtain an understanding of the work of that expert; and
● Evaluate the appropriateness of that expert’s work as audit evidence for the relevant assertion.


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The following factors should be considered while designing a confirmation request: -

SA 580 - WRITTEN REPRESENTATIONS

Miscellaneous Topic - SA 500

● Evaluate the competence, capabilities and objectivity of that expert;

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