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
B Assess the allegation, design further audit procedures, and evaluate the effect on the audit opinion
C Report immediately to shareholders without testing
D Reduce audit fee
E Issue disclaimer opinion directly
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