Why asking management is never enough
Why inquiry of management is not sufficient audit evidence on its own, why written representations do not fix that, and what should corroborate it.
By Achekam · · 4 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
Inquiry is the cheapest procedure in auditing. A question across the boardroom table costs a minute and usually produces a confident answer: no litigation, no new loans, nothing unusual after year end, the big customer is fine. On a busy file, it is tempting to write the answer down and move on.
The standards and the professional bodies are consistent that this is not enough. Inquiry starts the work; it does not finish it. This article explains why, using going concern as the clearest example, and sets out what should stand behind every answer management gives.
ACCA on inquiry, with going concern as the example
ACCA's article on going concern lists audit procedures that include reading the minutes of shareholders' meetings for signs of cash flow difficulties, liaising with the entity's legal advisers about litigation, evaluating the entity's plans for unfulfilled customer orders, and obtaining and reviewing reports of regulatory actions. It stresses that inquiry of management on its own will not generate sufficient appropriate audit evidence. ACCA frames that guidance around ISA 570; for periods within its scope, check the work against ISA 570 (Revised 2024).
Notice what each listed procedure does. Every one of them goes to a source other than management's spoken answer: the minutes, the lawyers, the order book, the regulator. That is the pattern to copy in every area. ACCA's technical article on going concern sets the procedures out in full.
Why is inquiry weak on its own? Management may not know the answer, may be wrong, may be optimistic, or in the worst case may have a reason to mislead. The person answering is rarely independent of the matter being asked about.
Written representations support evidence but do not replace it
A common shortcut is to move the answer into the representation letter and treat it as settled. ACCA explains that ISA 580, Written Representations, recognises that written representations provide necessary audit evidence but do not on their own provide sufficient appropriate audit evidence about any of the matters they deal with.
A signed letter makes management's answer formal, and it gives the auditor a record that management took responsibility for it. It does not make the answer true. If the only support for the completeness of liabilities is a sentence in the representation letter, the file has the same gap it had before, now with a signature on it. Written representations covers what the letter should and should not be asked to do.
Challenging management's answers
ICAEW explains that ISA 200 defines professional scepticism as including a questioning mind, alertness to conditions that may indicate misstatement due to error or fraud, and a critical assessment of evidence, and adds that it includes challenging the reliability of responses from management and those charged with governance.
Challenge does not mean disbelief. It means treating an answer as a claim to be checked, and noticing when the answer does not fit what the team already knows. If the financial director says there is no litigation but the legal fees account has grown sharply, the inquiry has produced a question, not an answer.
Corroborating with documents, confirmations and records
ACCA explains that procedures are the actions auditors carry out and evidence is what those actions produce, such as the customers' replies to a receivables circularisation. Inquiry produces evidence too, but weak evidence; corroboration is what turns it into something a conclusion can rest on. Typical sources, roughly from most to least independent of management:
- Third parties: bank confirmations, attorneys' letters, customer and supplier confirmations, regulators' correspondence.
- External documents held by the client: contracts, loan agreements, title deeds, bank statements, tax assessments.
- Internal records with their own trail: minutes, the order book, payroll records, the fixed asset register.
- Events after year end: receipts, payments and settlements that show how matters actually turned out.
- Other people in the entity: the sales manager, the warehouse supervisor or in-house legal adviser, whose answers can be compared with the financial director's.
Requesting documents and planning confirmations in Achekam
In Achekam, staff create, send and track requests to clients for documents, answers and confirmations in one RFI console, whichever screen the request was raised from. When management says "there is a new loan, but it is on normal terms", the next step is a request for the agreement, tracked in the same place as every other outstanding item. Using client uploads as audit evidence covers how to assess what comes back.
For evidence from third parties, staff plan external confirmations and prepare requests that a different person approves, and each respondent answers through a single-use link. Achekam does not send confirmation requests itself; staff send them and record how.
On the work item, each step lists the procedure and the documents required, and a step is marked done only with a written response and its documents, or set aside with a reason. A step answered only with "per discussion with the financial director" and no document is visibly incomplete, which is exactly what a reviewer needs to see.
A corroboration checklist
For every significant answer from management, the paper should show:
- The question, the answer, who gave it and when.
- At least one source other than management that supports or contradicts it.
- Why that source is reliable enough for the matter.
- Any inconsistency with other evidence on the file, and how it was resolved.
- Whether the matter also needs a written representation, and confirmation that the representation is not the only support.
- The conclusion, in terms of what the evidence shows rather than what management said.
Inquiry will always be the first procedure on many papers, and rightly so; management knows things nobody else does. The discipline is simply never to let it be the last.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
