SA 580 Written Representations — Handling Inconsistency with Audit Evidence
## SA 580: When Written Representations Contradict Audit Evidence
Written representations lose their reliability when they conflict with other audit findings. This raises fundamental concerns about management's competence, integrity, ethical values, or diligence.
### Step-by-Step Response
Step 1 — Attempt to Resolve
Perform additional audit procedures to resolve the inconsistency between the written representation and other audit evidence.
Step 2 — Reassess Management
If the matter remains unresolved, reconsider the assessment of management's:
Competence
Integrity
Ethical values
Diligence and commitment to enforcement
Step 3 — Determine Broader Impact
Evaluate the effect on the reliability of representations and audit evidence in general — not just the specific point of inconsistency.
Step 4 — Modify the Audit Opinion if Necessary
If the auditor concludes the written representations are not reliable, take appropriate actions including considering the impact on the auditor's opinion per SA 705. Options include:
Qualified opinion
Adverse opinion
Disclaimer of opinion (where representations are so unreliable that sufficient evidence cannot be obtained)
### Key Principle
An inconsistent written representation does not automatically lead to a modified opinion — but it triggers a rigorous reassessment process that may ultimately result in one.
Worked example
### Example 1
CA Jack Scenario (MTP 6): CA Jack obtained written representations from management about all known instances of non-compliance with laws and regulations. However, audit evidence indicated non-compliance that contradicted these representations — management's representations were incomplete or false. Steps: (1) Perform additional procedures to attempt to resolve the inconsistency. (2) If unresolved, reconsider management's integrity and competence. (3) Assess the broader effect on reliability of all audit evidence collected. (4) If representations are deemed unreliable, consider a modified opinion under SA 705 — potentially a disclaimer of opinion given the severity of management's misrepresentation.
⚠️ Common exam mistakes
Stopping analysis at the specific inconsistency without reassessing the broader reliability of all management representations
Jumping directly to a modified opinion without first attempting to resolve the inconsistency through additional procedures
Forgetting that a disclaimer of opinion may be required when representations are fundamentally unreliable — not just a qualified opinion
Treating the inconsistency as a minor documentation gap rather than a signal about management integrity affecting the entire audit
Bare-Act text Reliability of Written Representations · SA 580 – Written Representations · click to expand
If written representations are inconsistent with other audit evidence, the auditor shall perform audit procedures to attempt to resolve the matter. If the matter remains unresolved, the auditor shall reconsider the assessment of the competence, integrity, ethical values or diligence of management, or of its commitment to or enforcement of these, and shall determine the effect that this may have on the reliability of representations and audit evidence in general. If the auditor concludes that the written representations are not reliable, the auditor shall take appropriate actions, including determining the possible effect on the opinion in the auditor's report in accordance with SA 705, having regard to the requirement of disclaimer of opinion.