SAS No. 40 The Auditor’s Responsibilities Relating to Other Information in Documents Containing Audited Financial Statements  

Status

Issued by Auditing Standards Committee in Taiwan on 1 July, 2004.

Summary

The objective of this Statement is to require the auditor to respond appropriately when documents containing audited financial statements and the auditor’s report thereon include other information that could undermine the credibility of those financial statements and the auditor’s report.

Other information may comprise, for example:

  • A report by management regarding the company and its operations.
  • Financial summaries or highlights.
  • A letter to the shareholders.
  • Planned capital expenditures.
  • Financial ratios and risk analysis.
  • The operation of those charged with governance.
  • Others as required by the regulations.

The auditor shall make appropriate arrangements with management or those charged with governance to obtain the other information prior to the date of the auditor’s report.

If, on reading the other information, the auditor identifies a material inconsistency, the auditor shall determine whether the audited financial statements or the other information needs to be revised.

If revision of the audited financial statements is necessary and management refuses to make the revision, the auditor shall modify the opinion in the auditor’s report.

If revision of the other information is necessary and management refuses to make the revision, the auditor shall include in the auditor’s report an Other Matter(s) paragraph describing the material inconsistency; or withhold the auditor’s report; or withdraw from the engagements, and the auditor may base any decision on what further action to take on advice from the auditor’s legal counsel.

If, on reading the other information for the purpose of identifying material inconsistencies, the auditor becomes aware of an apparent material misstatement of fact, the auditor shall discuss the matter with management. If, following such discussions, the auditor still considers that there is an apparent material misstatement of fact, the auditor shall request management to consult with a qualified third party, such as the entity’s legal counsel, and the auditor shall consider the advice received. If the auditor concludes that there is a material misstatement of fact in the other information which management refuses to correct, the auditor shall take appropriate actions. 

If management agrees to revise the other information when material inconsistencies are identified in other information obtained subsequent to the date of the auditor’s report, the auditor’s procedures may include reviewing the steps taken by management to ensure that individuals in receipt of the previously issued information are informed of the revision. When management refuses to make the revision of such other information that the auditor concludes is necessary, appropriate further actions by the auditor may include obtaining advice from the auditor’s legal counsel. 

Effective date

This Statement is effective from 1 January, 2005.

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