Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

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How would an auditor respond if they find indications of significant fraud during the audit process?

  1. Alter the audit strategy to focus on fraud detection.

  2. Continue with the current audit plan without changes.

  3. Modify their opinion based solely on fraud suspicion.

  4. Discuss findings with management and legal counsel.

The correct answer is: Alter the audit strategy to focus on fraud detection.

When an auditor discovers indications of significant fraud during the audit process, adjusting the audit strategy to focus on fraud detection becomes essential. This approach reflects an understanding of the heightened risks associated with fraud and the need for a comprehensive assessment to gather sufficient appropriate evidence regarding the extent and impact of the fraudulent activities. Recognizing the seriousness of the situation, the auditor may choose to perform additional procedures specifically designed to detect the type of fraud suspected. This could involve revisiting areas of the financial statements related to the fraud, conducting more extensive analytical procedures, or increasing the sample sizes of data examined. By realigning the audit strategy, auditors can better address the heightened risk of material misstatement due to fraud, ensuring that they fulfill their responsibility to provide a fair opinion on the financial statements. Continuing with the original audit plan without modification does not incorporate the new risk factors presented by the discovery of fraud, risking an inadequate assessment of the financial statements. Similarly, modifying the opinion based solely on suspicion without sufficient evidence to support such a conclusion would not adhere to accepted auditing standards. Lastly, while discussing findings with management and legal counsel is crucial, it should be part of a broader response that includes concrete adjustments to the audit strategy to ensure thorough investigation and compliance with ethical and professional standards

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