Evaluating Audit Evidence and Representation at Crighton-Ward

This report assesses the audit evidence related to Crighton-Ward, a specialist car manufacturer facing a significant legal claim from Lion's Roar due to a defective vehicle. The report addresses the necessity of including a paragraph about the claim in the management representation letter, considering the materiality of the amount and the lack of sufficient supportive evidence. It explores the auditor's required actions, particularly in situations where the client refuses to provide written representations, which could lead to a qualified opinion or a disclaimer of opinion. The analysis emphasizes the importance of obtaining written statements and confirming accounting treatments to ensure the accuracy and reliability of financial statements. Desklib offers a range of solved assignments and past papers for students seeking further assistance.

Audit Evidence

Table of Contents
Part A.........................................................................................................................................3
Paragraph to be included in representation letter...................................................................3
Part B..........................................................................................................................................3
Actions the auditor.................................................................................................................3
References..................................................................................................................................5

Part A
Paragraph to be included in representation letter
In the concerned case, the amount stipulated is material as it contains significant part of
profit. Along with this there is insufficient supportive evidence for the claim. Further, there
are two key parts of evidence; Lion‟s Roar claim and legit suggestion from legal
representative of Crighton
Ward. On the other hand, any amount of the claim will not be appropriately identified due to
non-settlement of dispute. According to the directors, claim must not be justifiable, which is
the most potential result of the dispute. Conversely, for acquiring adequate evidence to reveal
how the possible claim treatment was put in decision for the financial statements, for this the
auditor must acquire the opinion in written statement (Matlock, Abreu, Sen & Goedeke,
2015). Thus, reference must be placed in the representation letter of the claim along with the
inclusion of paragraphs. A claim was made from Lion”s Roar which has been acquired with
an assumed worth of $4million, and considering the non-justifiable claim it is been believed
that there is no contravene of product specification. The concerned fact is assessed to be
potential thereby there is no provisional statements but these are disclosed in terms of notes.
It is also confirmed that such type of claims has not been obtained or likely to be obtained.
This matter is not likely to be contained the representation letter, it is because the auditor
seems to have gained the adequate evidence in order to make confirmation of accounting
treatment. The inadequate gain or loss on sales has been confirmed that depreciation is
appropriately charged, since high profits will indicate over charge of depreciation and high
losses in under charge of depreciation. Further, the total amount also satisfies the industrial
standards, in support of the acceptability of accounting policies. Given that the point in the
letter of representation is non-appropriate due to the less significance of matter which does
not tends to be based on opinions. The appropriate opinion is the author’s opinion, unless and
until the feelings are converted into viable audit evidence, then the matter shall be put to an
end.
Part B
Actions the auditor
As per Oman audit provisions, letter of representation must be agreed and signed by
individuals possessing highest authority in the enterprise for example CEO and financial

Director in support of the board (Hokamp, 2014). Where a client refuses to give written
representations, this would constitute a limitation in the scope of the audit work. Here
the auditor may issue a modified audit opinion in the form of a:
- Qualified opinion with “except for” or
- Disclaimer of opinion.

References
Hokamp, S. (2014). Dynamics of tax evasion with back auditing, social norm updating, and
public goods provision–An agent-based simulation. Journal of Economic
Psychology, 40, 187-199.
Matlock, G., Abreu, M., Sen, A., & Goedeke, T. (2015). An Evaluation of NOAA’s Planning,
Programming, Budgeting & Execution System (PPBES).