When substantive tests performed identify errors or exceptions, the auditor's first response is to:
A) qualify the audit report.
B) report the client to ASIC.
C) understand why the exception or error has arisen.
D) None of the above

Question

Quizplus · Accepted Answer

The auditor's first response should be to understand why the exception or error has arisen. This will allow the auditor to determine if it is a material misstatement and if further audit procedures are needed, as well as potentially identifying any control deficiencies or fraud risks. Qualifying the audit report or reporting the client to ASIC should only be considered if the material misstatement is pervasive and cannot be appropriately resolved through further audit procedures or if there is evidence of fraud or illegal acts.

When Substantive Tests Performed Identify Errors or Exceptions, the Auditor's