What should an audit team do when it discovers that fraud risk factors are present on an audit engagement?
A)Withdraw from the engagement and inform regulatory bodies.
B)Modify procedures to actively search for the existence of fraud.
C)Reduce the amount of evidence required and resort to management inquiry.
D)Turn the audit over to forensic accountants.

Question

Quizplus · Accepted Answer

When fraud risk factors are present on an audit engagement, the audit team should modify their procedures to actively search for the existence of fraud. This may include reviewing journal entries, analyzing transactions, and conducting additional interviews with management or employees. The goal is to obtain sufficient evidence to evaluate the risk of material misstatement due to fraud. Simply reducing the amount of evidence required or solely relying on management inquiry would not be sufficient in addressing the presence of fraud risk factors. Withdrawing from the engagement or turning it over to forensic accountants may not be necessary depending on the severity and nature of the fraud risk factors.

What Should an Audit Team Do When It Discovers That