While performing their audit, the audit team uncovers fraud that is likely to have an immaterial affect on the financial statements taken as whole. In this case the auditors should:
A) plan on additional audit procedures to determine the exact amount of the fraud.
B) communicate with legal authorities as to the identity of the fraudsters.
C) disclose the fraud to the appropriate level of management or to the audit committee.
D) call the whistleblower hotline and name the suspected individuals.

Question

Quizplus · Accepted Answer

The auditors have a responsibility to disclose the fraud to the appropriate level of management. This ensures that management is aware of the issue and can take appropriate action to prevent it from recurring in the future. The audit committee may also need to be informed, depending on the circumstances. However, there is no need to plan additional audit procedures to determine the exact amount of the fraud, as it is already determined to have an immaterial effect on the financial statements taken as a whole. Communicating with legal authorities or calling the whistleblower hotline may be necessary depending on the specific circumstances, but it is not necessary in all cases.

While Performing Their Audit, the Audit Team Uncovers Fraud That