An auditor discovers a likely fraud during an audit but concludes that the overall effect of the fraud is not sufficiently material to affect the audit opinion. The auditor should probably:
A)disclose the fraud to the appropriate level of the client's management.
B)disclose the fraud to appropriate authorities external to the client.
C)discuss with the client the additional audit procedures that will be needed to identify the exact amount of the fraud.
D)modify the audit program to include tests specifically designed to identify the fraud and its impact on the financial statements.

Question

Quizplus · Accepted Answer

Although the overall effect of the fraud may not be material enough to affect the audit opinion, the auditor still has a duty to disclose the fraud to the appropriate level of the client's management. This is because management is responsible for preventing and detecting fraud and should be made aware of any potential fraudulent activities within the organization. The auditor should also discuss with management the necessary remedial actions to prevent future occurrences of the fraud.

An Auditor Discovers a Likely Fraud During an Audit but Concludes