The auditor comes through several matters during the audit process which are required to be informed to the management of the client. However the auditor needs to choose the appropriate level of the management to communicate the matters. Some matters may be too crucial that those cannot be communicated to the management, due to management involvement or fraud. In such cases the auditor should communicate the matter to those charged with governance. The auditor is responsible to communicate relevant matters to those charged with governance people on timely basis. To choose: The correct statement about auditor’s communication of fraud.

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Chapter 4, Problem 4.22MCQ

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Concept Introduction:The auditor comes through several matters during the audit process which are required to be informed to the management of the client. However the auditor needs to choose the appropriate level of the management to communicate the matters. Some matters may be too crucial that those cannot be communicated to the management, due to management involvement or fraud. In such cases the auditor should communicate the matter to those charged with governance. The auditor is responsible to communicate relevant matters to those charged with governance people on timely basis.

To choose: The correct statement about auditor’s communication of fraud.

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Which of the following statements is correct with regards to the auditor's responsibility concerning fraud? a.Fraud detection is the objective of an audit. b.It is the auditor's responsibility to prevent fraud. c.The auditor is responsible for obtaining reasonable assurance that the financial statements are free from material statement, whether caused by fraud or error. d.When fraud is discovered by the auditor they must withdraw from the engagement.

When planning the audit, the auditor must make enquiries of management. Which one of the following is not an appropriate enquiry of management about fraud? a.The auditor should ask management if they are personally engaged in fraudulent activity, including fraudulent financial reporting and misappropriation of assets. b.The auditor should ask about management's communications with employees about ethical behavior. c.The auditor should ask management about any communications with those charged with governance regarding its processes for identifying and responding to the risks of fraud in the entity. d.The auditor should ask management about their assessment of the risk that the financial statements may be materially misstated due to fraud.

Which of the following statements reflects an auditor’s responsibility for detectingfraud?(1) An auditor is responsible for detecting employee errors and simple fraud, butnot for discovering fraudulent acts involving employee collusion or managementoverride.(2) An auditor should plan the audit to detect fraud caused by departures from GAAP.(3) An auditor is not responsible for detecting fraud unless the application of auditingstandards would result in such detection.(4) An auditor should design the audit to provide reasonable assurance of detectingerrors and fraud that are material to the financial statements.