An auditor discovers a likely fraud during an audit but concludes that the overall effect of the fraud is not sufficiently material to affect the audit opinion.The auditor should probably
A) Disclose the fraud to the appropriate level of the client's management.
B) Disclose the fraud to appropriate authorities external to the client.
C) Discuss with the client the additional audit procedures that will be needed to identify the exact amount of the fraud.
D) Modify the audit program to include tests specifically designed to identify the fraud and its impact on the financial statements.

Question

Quizplus · Accepted Answer

The auditor should disclose the fraud to the appropriate level of the client's management, as it is their responsibility to investigate and take appropriate actions to remedy the situation. This would also help to prevent the fraud from continuing or expanding in the future. The auditor should also document the discovery of the fraud and the actions taken in response. However, if there is evidence of illegal activity, the auditor should also consider whether disclosure to authorities external to the client is necessary. Modifying the audit program or performing additional audit procedures may also be necessary to ensure that the financial statements are fairly presented.

An Auditor Discovers a Likely Fraud During an Audit but Concludes