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
(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.
User Balance 985 / Points