5.Greenfields Co specialises in manufacturing equipment which can help to reduce toxic emissions in the production of chemicals. The company has grown rapidly over the past eight years and this is due partly to the warranties that the company gives to its customers. It guarantees its products for five years and if problems arise in this period it undertakes to fix them, or provide a replacement product.You are the manager responsible for the audit of Greenfields and you are performing the final review stage of the audit and have come across the following two issues.Receivable balance owing from Yellowmix CoGreenfields has a material receivable balance owing from its customer, Yellowmix Co. During the year-end audit, your team reviewed the ageing of this balance and found that no payments had been received from Yellowmix for over six months, and Greenfields would not allow this balance to be circularised. Instead management has assured your team that they will provide a written representation confirming that the balance is recoverable.Warranty provisionThe warranty provision included within the statement of financial position is material. The audit team has performed testing over the calculations and assumptions which are consistent with prior years. The team has requested a written representation from management confirming the basis and amount of the provision are reasonable. Management has yet to confirm acceptance of this representation.Required:
(c) The directors of Greenfields have decided not to provide the audit firm with the written representation for the warranty provision as they feel that it is unnecessary.Required:Explain the steps the auditor of Greenfields Co should now take and the impact on the audit report in relation to the refusal to provide the written representation. (5 marks)
参考答案：Steps to take if written representation on warranty provision is not providedISA EH0 Written Representations provides guidance to the auditor in the case where written representations are requested from management but they refuse to provide.If management does not provide the requested written representation on the warranty provision the auditor of Greenfields should discuss the matter with management to understand why they are refusing.In addition the auditor should re-evaluate the integrity of Greenfields’ management and consider the effect that this may have on the reliability of other representations (oral or written) and audit evidence in general.The auditor should then take appropriate actions, including determining the possible effect on the audit opinion.Impact on audit reportAs the auditor is unable to obtain sufficient appropriate evidence to conclude that the warranty provision is free from material misstatement then a modified audit opinion will be required.The warranty provision is material but not pervasive and therefore a qualified opinion would be appropriate.The audit report will require an additional paragraph before the opinion which will describe the reason for the modification; namely that management refused to provide a written representation in relation to the warranty provision and hence we are unable to form an opinion on this balance. The opinion paragraph will be amended to state ‘except for’.