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    Admin posted in the group CA Final Audit Discussion Group

    1 year, 3 months ago

    MNO Ltd. is a company engaged in the manufacture of Kids toys. The
    company sells its goods on credit basis. M/s. Ajay Vijay & Associates
    have been appointed as statutory auditors of MNO Ltd. for the FY 2019-
    20. During the course of audit, CA Ajay, the engagement partner asks
    the management about the email addresses of trade receivables of the
    company for the purpose of obtaining balance confirmation from the
    trade receivables. The management of the company asked its sales
    supervisor to send confirmation request to the trade receivables and
    collect all the responses and provide all such responses to the auditor.
    The management of MNO Ltd. also informed CA Ajay that confirmation
    with respect to two of its trade receivables namely Sports Star Ltd. and
    Kids Zone Ltd. won’t be available as a dispute between MNO Ltd. and
    both the trade receivables is going on. With respect to other trade
    receivables, the sales supervisor provided CA Ajay with all the balance
    confirmation. With respect to the balance confirmation request, which
    of the following is warranted as per the requirement of the relevant SA?

    (a) CA Ajay should not have relied on the explanation provided by
    the management with respect to the trade receivables namely
    Sports Star Ltd. and Kids Zone Ltd. and he should perform
    alternative procedures with respect to such trade receivables.

    (b) CA Ajay should have obtained direct response from all other
    trade receivables instead of sales supervisor receiving direct
    responses from trade receivables and providing them to the
    auditor.

    (c) Both a and b.

    (d) CA Ajay should give a qualified opinion as balance confirmation
    with respect to two trade receivables is not available.