SA Express

When the first two error was discovered – VAT – there was no breach of trust as Nkonki were prepared to accept that an error had been made and a new audit report would have been signed, in fact no different from the first one. This applied even after the forensic report. It was only after Nkonki were presented with the adjustments and after our lone an arduous debate with management about the evidence was there a complete breakdown in trust. If SAX were so insistent that Nkonki were wrong it was their obligation to have Nkonki removed as auditors immediately and another audit firm appointed. This they did not do and therefore accepting the possibility of a disclaimer. It is disingenuous of the board to feel that Nkonki were so wrong and so aggressive to now and not remove Nkonki as auditors. It is hard to imagine why they did not remove Nkonki after feeling the way they did. The CEO appeared by abstaining from the signing of the representation letter to agree with Nkonki and that could be the reason why Nkonki were not removed. 

ISA 580 para A3 - Due to its responsibility for the preparation of the financial statements, and its responsibilities for the conduct of the entity’s business, management would be expected to have sufficient knowledge of the process followed by the entity in preparing the financial statements and the assertions therein on which to base the written representations. Therefore, if the CEO refuses to sign the management representation letter it is within our rights as the auditor to be suspicious of the adjustments and the related amended financial statements. We considered that by the CEO refusing to sign the management representation it was if they were not provided and were guided by ISA 580 para 19 - Re-evaluate the integrity of management and evaluate the effect that this may have on the reliability of representations (oral or written) and audit evidence in general.