Question

When encountering indications of potential fraud, what steps should auditors consider?

a) Emphasize to the audit team the need to maintain professional skepticism
b) Request management to eliminate the material misstatement
c) Attempt to obtain audit evidence to determine whether material fraud has occurred
d) Discussions among engagement personnel

Answer 1

Auditors should emphasize professional skepticism, gather evidence about potential fraud, and engage in discussions among the engagement personnel.

Step-by-step explanation:

Auditors should emphasize professional skepticism, gather evidence about potential fraud, and engage in discussions among the engagement personnel.

Auditors encountering indications of potential fraud should consider the following steps:

1. Emphasize to the audit team the need to maintain professional skepticism: This encourages auditors to question and critically assess the evidence they encounter during the audit process.
2. Attempt to obtain audit evidence to determine whether material fraud has occurred: Auditors should gather sufficient evidence to evaluate the possibility of material fraud.
3. Discussions among engagement personnel: Engaging in discussions helps auditors share information, insights, and concerns related to potential fraud.