Question

During a statutory audit, the auditor discovers a pattern of journal entries posted near year-end reversing shortly after year-end that inflate reported profit. Management explains entries as timing differences. What is the auditor’s most appropriate immediate course of action?

A Accept management explanation if occasional and small.
B Expand procedures: test entries’ authorization, supporting documentation, interview preparers, and assess for fraud risk; consider reporting to those charged with governance.
C Ignore—these are adjusting entries by preparer.
D Issue an adverse opinion immediately.
E Increase materiality threshold to avoid flagging small manipulations.
Practice Next

Hey! Ask a query

🎓
Think You're Ready for RBI Grade B?
RBI Grade B 2026 Phase 1 Memory Based Paper
  • 200 Questions with Detailed Solutions
  • Section-wise Coverage (GA, English, Quant & Reasoning)