The directors of Vaanya Agro Ltd. instruct the statutory auditor not to verify inventory held at one of its five depots, stating that the depot manager is trustworthy. Inventory at that depot is material to the financial statements. Which statement best reflects the position of the auditor?

Correct answer: A) The scope of the audit is determined by the auditor under the SAs, the applicable law and the terms of engagement, and such a restriction is a management-imposed limitation that may lead to a modified opinion

Explanation

The scope of an audit is set by the requirements of the SAs, relevant law and the terms of engagement, and management cannot curtail it. A management-imposed restriction over a material item is a limitation on scope; under SA 705 the auditor should request removal, communicate with those charged with governance and consider alternative procedures. If sufficient appropriate evidence still cannot be obtained, the opinion must be modified. A representation from an interested employee is not a substitute for the evidence.