Question

Which actions should an auditor consider when addressing potential material fraud?

a) Discussions among engagement personnel
b) Nature, timing, and extent of procedures performed
c) Consider implications for other audit aspects
d) Suggest legal counsel involvement

Answer 1

An auditor should consider discussions among engagement personnel, the nature, timing, and extent of procedures performed, and the implications for other audit aspects when addressing potential material fraud.

Step-by-step explanation:

An auditor should consider several actions when addressing potential material fraud:

1. Discussions among engagement personnel: The auditor should engage in discussions with the audit team to identify any potential areas of fraud and determine the appropriate actions to address them.
2. Nature, timing, and extent of procedures performed: The auditor should consider the nature, timing, and extent of the audit procedures to be performed, ensuring they are designed to detect material fraud.
3. Consider implications for other audit aspects: The auditor should evaluate how potential material fraud may impact other aspects of the audit, such as financial statement assertions, internal controls, and the risk of material misstatement.