The auditors of a company have only relied upon management representationletter regarding treatment of certain tax matters under appeal by the company. Theauditors have not carried out any other audit procedures to justify management’streatment of the said tax matters under appeal in the financial statements. What islacking on part of auditors in such a situation?

In this situation, the auditors are lacking in their duty to perform sufficient audit procedures to obtain reasonable assurance about whether the financial statements are free of material misstatement. This is a key part of an auditor's responsibility under auditing standards.

1. Audit Evidence: The auditors have relied solely on the management representation letter for a significant matter. They have not obtained sufficient appropriate audit evidence about the tax matters under appeal, which is a requirement under auditing standards.

2. Professional Skepticism: The auditors have not exercised professional skepticism. They have accepted the management's assertions without performing any procedures to corroborate them.

3. Risk Assessment: The auditors have not properly assessed the risks of material misstatement in the financial statements due to the tax matters under appeal.

4. Compliance with Auditing Standards: The auditors have not complied with auditing standards which require them to design and implement responses to the assessed risks of material misstatement.

In conclusion, the auditors are lacking in their duty to perform sufficient audit procedures, exercise professional skepticism, assess risks of material misstatement, and comply with auditing standards.

In this situation, the auditors are lacking due diligence and professional skepticism.

1. Due Diligence: Auditors are required to perform sufficient audit procedures to obtain reasonable assurance about whether the financial statements are free from material misstatement. By solely relying on the management representation letter, the auditors are not exercising due diligence. They should independently verify the information provided by the management regarding the tax matters under appeal.

2. Professional Skepticism: Auditors should maintain an attitude of professional skepticism throughout the audit. This means they should critically assess audit evidence and not simply accept what management says at face value. In this case, the auditors have failed to exhibit professional skepticism by not questioning or verifying the management's treatment of the tax matters under appeal.

In conclusion, the auditors are lacking in their responsibility to perform a thorough and unbiased audit. They should have conducted additional audit procedures to justify the management's treatment of the tax matters under appeal in the financial statements.