You are the auditor of Birham Ltd and are in the process of completing the audit for the year ended 30 June 2020. There are two outstanding matters highlighted in your firm's completion documentation: (i) You have heard rumours that Birham Ltd is ready to merge with a competitor. If correct, this may have disclosure implications. Management advises you that although they have had several meetings with the competitor's management in question, no such merger is currently planned. Management has offered to make written representations confirming their intentions. (ii) The invoices to support the cost of a significant purchase of plant and machinery cannot be traced. Management has offered to make written representations confirming the cost of the plant and machinery. Question: Are the management's written representations sufficient to resolve the two outstanding matters noted above? Please justify your answer.
You are the auditor of Birham Ltd and are in the process of completing the audit for the year ended 30 June 2020.
There are two outstanding matters highlighted in your firm's completion documentation:
(i) You have heard rumours that Birham Ltd is ready to merge with a competitor. If correct, this may have disclosure implications. Management advises you that although they have had several meetings with the competitor's management in question, no such merger is currently planned. Management has offered to make written representations confirming their intentions.
(ii) The invoices to support the cost of a significant purchase of plant and machinery cannot be traced. Management has offered to make written representations confirming the cost of the plant and machinery.
Question:
Are the management's written representations sufficient to resolve the two outstanding matters noted above? Please justify your answer.
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