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 identified, the auditor should perform additional audit procedures to investigate the matter further to obtain sufficient appropriate evidence about the amounts and disclosures in the financial statements. This is necessary to form an opinion on the financial statements as a whole. The auditor should not consider the matter a scope limitation unless management restricts the auditor's ability to obtain sufficient appropriate evidence. Intensifying the audit with the expectation of detecting management fraud is not appropriate unless there is reasonable suspicion of such fraud. Withdrawing from the engagement is not appropriate unless the auditor concludes that the resulting misstatements are pervasive and the effect on the financial statements is material and the client refuses to correct them.

Assume That Application of Analytical Procedures Revealed Significant Unexplained Differences