24. Which of the following statements concerning the auditor\'s responsibility t

Question

24. Which of the following statements concerning the auditor's responsibility to report fraud is correct? a. When the auditor determines that the fraud has no material effect on the financial statements, the b. When the auditor determines that the fraud has a material effect on the financial statements, the auditor should refer the fraud to the audit committee. auditor should issue an unqualified opinion if the management refuses to revise the financial statements. c. When the auditor is precluded from investigating the effect of the fraud, the auditor should report the matter to the board of directors. d. When the auditor determines that there is no fraud, the auditor should not issue a disclaimer opinion.

Explanation / Answer

a.

This is not correct: Since there is no material effect, the matter should be referred to the management of the organization.

b.

This is not correct: Unqualified opinion means an acceptance that the financial statements are true; but since there is fraud and it has material effect, the auditor can’t give such acceptance.

d.

This is not correct: Disclaimer of opinion is issued by the auditor who didn’t get proper evidence of accounting; it doesn’t mean that every non-fraud audit has this problem.

Answer: c; correct

The auditor should inform to the board of directors incase of any of non-cooperation from working staffs of the organization while investigating fraud.

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