When substantive tests performed identify errors or exceptions, the first response is to:
A) qualify the audit report.
B) understand why the exception or error has arisen.
C) report the client to Canada Revenue Agency (CRA).
D) perform additional substantive testing.

Question

Quizplus · Accepted Answer

The first response to identifying errors or exceptions should be to understand why they have arisen. This will allow the auditor to determine if there are any underlying control deficiencies or if the client has intentionally falsified information. Once the cause of the error or exception is determined, the auditor can then decide if additional substantive testing is necessary or if they need to qualify the audit report. Reporting the client to the CRA is not an appropriate response and should not be done without substantial evidence of intentional fraud.

When Substantive Tests Performed Identify Errors or Exceptions, the First