The auditor notices significant fluctuations in key elements of the company's financial statements. If management is unable to provide an acceptable explanation, the auditor should:
A)consider the matter a scope limitation.
B)perform additional audit procedures to investigate the matter further.
C)intensify the examination with the expectation of detecting management fraud.
D)withdraw from the engagement.

Question

Quizplus · Accepted Answer

The auditor should perform additional audit procedures to investigate the matter further. Significant fluctuations in key elements of financial statements could be an indication of fraudulent activity or error, and it is the auditor's responsibility to obtain sufficient evidence to form an opinion on the financial statements. Therefore, the auditor must investigate the matter further and obtain an acceptable explanation from management. If management is unable to provide an acceptable explanation, the auditor should consider whether the matter constitutes a scope limitation or indicates the possibility of fraud. However, withdrawing from the engagement should only be considered as a last resort if the auditor is unable to obtain sufficient evidence to form an opinion.

The Auditor Notices Significant Fluctuations in Key Elements of the Company's