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    Question

    During audit of XYZ Ltd., the auditor noted that the

    management concealed certain pending litigations that could affect profitability. However, the CFO insisted it was not material. The auditor suspects deliberate omission. Under SA 200 and SA 240, what should the auditor do?
    A Accept management’s view Correct Answer Incorrect Answer
    B Ignore since it's immaterial Correct Answer Incorrect Answer
    C Extend audit procedures and consider modifying opinion Correct Answer Incorrect Answer
    D Resign from audit Correct Answer Incorrect Answer

    Solution

    As per SA 240, if there is a suspicion of fraud or material misstatement, the auditor must enhance audit procedures and consider modifying or qualifying the opinion.

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