Written representations are an important source of evidence to the auditor. Normally during the course of an audit, management make oral representations to auditors on many matters. To reduce the possibility of misunderstanding, auditors may require such information to be confirmed in writing. The Audit Manager asked the CEO of the audit client to confirm via the Management Representation Letter that the debt owed by one of their major customers, namely Ironman Ltd, was collectible. The CEO confirmed that the debt was collectible and included such in the Management Representation Letter. It was subsequently revealed via discussions with the Accountant of the audit client that a letter was received from Ironman Ltd a few weeks ago which indicated that they were in liquidation and could not honor their debt. The letter was given to the CEO who took the letter and advised the Accountant that he would handle it. The CEO said that he lost the letter when questioned about same by the Audit Manager. In addition, the confirmation response received by the Auditors from Ironman Ltd stated that they could not pay back the debt.

Required: As per ISA 580 Written Representations describe what guidance is given to auditors in such circumstances and advise what course of action the auditor should now take.