Auditor's Responsibility for Reporting Fraud
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Questions and Answers

What is the auditor's primary responsibility regarding client confidentiality according to the text?

  • The auditor has no responsibility to report suspected fraud to an outside party.
  • The auditor must determine if there is a responsibility to report suspected fraud to a party outside the entity. (correct)
  • The auditor must always maintain the confidentiality of client information.
  • The auditor must report any suspicion of fraud to a party outside the entity.

    • Which of the following is NOT required to be documented by the auditor according to the text?

  • Significant decisions made during engagement team discussions.
  • Results of audit procedures performed. (correct)
  • The auditor's decision to not consider revenue recognition as a fraud risk.
  • Identified and assessed risks of fraud at the financial statement and assertion levels.

    • What is the traditional 'passive philosophy' towards the auditor's responsibility for fraud detection according to the text?

  • The auditor is responsible for actively detecting fraud.
  • The auditor is responsible for thoroughly examining the client's books and records for signs of fraud.
  • The auditor is not responsible for detecting fraud, only for reporting suspected fraud.
  • The auditor is not bound to be a detective or approach the audit with suspicion. (correct)

    • What is the auditor's role in relation to fraud detection?

    <p>The auditor is responsible for assessing the risk of fraud and designing appropriate audit procedures.</p> Signup and view all the answers

    What is the significance of the auditor's decision to not consider the risk of fraud in revenue recognition as a 'significant risk' according to the text?

    <p>This decision must be documented by the auditor as part of the audit documentation.</p> Signup and view all the answers

    What is the main shift in auditor responsibilities regarding fraud detection described in the text?

    <p>Auditors are now required to determine if there is a responsibility to report suspected fraud to a party outside the entity.</p> Signup and view all the answers

    What is the auditor's responsibility regarding the oversight of management's fraud risk assessment and response processes?

    <p>The auditor should understand how those charged with governance, such as the audit committee, exercise oversight of management's fraud risk assessment and response processes.</p> Signup and view all the answers

    What is the auditor's responsibility regarding inquiries about fraud with those charged with governance?

    <p>The auditor is required to inquire whether those charged with governance have knowledge of any actual, suspected or alleged fraud affecting the entity.</p> Signup and view all the answers

    What is the purpose of performing analytical procedures during the planning stage of the audit?

    <p>Analytical procedures during planning may be helpful in identifying unusual or unexpected relationships or events that might indicate material misstatements, particularly in revenue accounts.</p> Signup and view all the answers

    What is the auditor's responsibility regarding the presumption of fraud risks in revenue recognition?

    <p>The auditor should consider which types of revenues may give rise to fraud risks, as the auditor ordinarily presumes that there are risks of fraud in revenue recognition.</p> Signup and view all the answers

    What is the auditor's responsibility regarding management's response to any findings resulting from the auditor's fraud detection procedures?

    <p>The auditor should understand whether management has satisfactorily responded to any findings resulting from the auditor's fraud detection procedures.</p> Signup and view all the answers

    What is the auditor's responsibility regarding other information obtained that may indicate a risk of material misstatement due to fraud?

    <p>The auditor should consider whether other information obtained indicates a risk of material misstatement due to fraud.</p> Signup and view all the answers

    What should management acknowledge its responsibility for in addition to the financial statements?

    <p>Fraud detection and prevention</p> Signup and view all the answers

    What must the auditor obtain written representations from management about regarding fraud?

    <p>Design and implementation of internal control to prevent and detect fraud</p> Signup and view all the answers

    When should the auditor communicate identified or potential fraud to management and governance authorities?

    <p>On a timely basis</p> Signup and view all the answers

    What should the auditor do if they determine that fraud may be present?

    <p>Communicate with the appropriate level of management, senior management, and governance as soon as practicable</p> Signup and view all the answers

    What should management disclose to auditors in relation to fraud?

    <p>Results of its assessment of the risk of frauds</p> Signup and view all the answers

    Why is it important for auditors to communicate fraud matters promptly?

    <p>To inform those responsible for fraud prevention and detection</p> Signup and view all the answers

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