Auditor's Responsibility for Reporting Fraud

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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?

The auditor is responsible for assessing the risk of fraud and designing appropriate audit procedures. (D) 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?

This decision must be documented by the auditor as part of the audit documentation. (B) Signup and view all the answers

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

Auditors are now required to determine if there is a responsibility to report suspected fraud to a party outside the entity. (A) Signup and view all the answers

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

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. (D) Signup and view all the answers

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

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

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

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

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

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. (C) 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?

The auditor should understand whether management has satisfactorily responded to any findings resulting from the auditor's fraud detection procedures. (A) 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?

The auditor should consider whether other information obtained indicates a risk of material misstatement due to fraud. (C) Signup and view all the answers

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

Fraud detection and prevention (B) Signup and view all the answers

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

Design and implementation of internal control to prevent and detect fraud (D) Signup and view all the answers

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

On a timely basis (A) Signup and view all the answers

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

Communicate with the appropriate level of management, senior management, and governance as soon as practicable (C) Signup and view all the answers

What should management disclose to auditors in relation to fraud?

Results of its assessment of the risk of frauds (B) Signup and view all the answers

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

To inform those responsible for fraud prevention and detection (D) Signup and view all the answers