If the auditor uncovers a misstatement while conducting substantive testing:
A)The auditor should refer the misstatement to the internal auditors for further investigation
B)The auditor should report the misstatement to the SEC
C)The misstatement should immediately be reported to senior management
D)The auditor needs to determine if the misstatement provides evidence of a weakness in internal controls.

Question

Quizplus · Accepted Answer

The auditor needs to determine if the misstatement provides evidence of a weakness in internal controls. This will help the auditor to assess the level of materiality and figure out the impact of the misstatement on financial statements. It will also help the auditor to assess the risk of material misstatement related to the assertion being tested. Once the auditor determines the potential impact on financial statements, appropriate actions, such as reporting the misstatement to senior management or reporting it to the audit committee, can be taken. Referring the misstatement to internal auditors for further investigation may not be necessary if the auditor concludes that it is not a material misstatement. Reporting the misstatement to the SEC should only be done if it is material and involves a violation of SEC regulations.

If the Auditor Uncovers a Misstatement While Conducting Substantive Testing