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    Question

    Under SA 240, the auditor’s responsibility relates to

    identifying and assessing risks of material misstatement due to fraud. If a whistleblower informs the auditor of possible revenue overstatement, what is the auditor’s next step?
    A Ignore unless evidence in audit file exists Correct Answer Incorrect Answer
    B Assess the allegation, design further audit procedures, and evaluate the effect on the audit opinion Correct Answer Incorrect Answer
    C Report immediately to shareholders without testing Correct Answer Incorrect Answer
    D Reduce audit fee Correct Answer Incorrect Answer
    E Issue disclaimer opinion directly Correct Answer Incorrect Answer

    Solution

    • SA 240 requires professional skepticism and investigation of fraud allegations through targeted procedures before concluding.

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