Assume that application of analytical procedures revealed significant unexplained differences between recorded amounts and the expectations (estimates) developed by the auditor. 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 audit with the expectation of detecting management fraud.
D)withdraw from the engagement.

Question

Quizplus · Accepted Answer

If significant unexplained differences are detected, it is the auditor's responsibility to investigate the matter further by performing additional audit procedures. This is necessary to obtain sufficient evidence to support the financial statements and provide reasonable assurance that they are free from material misstatement. Withdrawing from the engagement or considering the matter a scope limitation should only be considered after performing additional audit procedures and obtaining sufficient evidence to do so. Intensifying the audit with the expectation of detecting management fraud is not appropriate unless there are other indicators of fraud or suspicion of fraudulent activity.

Assume That Application of Analytical Procedures Revealed Significant Unexplained Differences