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      Question

      You are auditing a mid-sized company. The CFO has

      unilaterally overridden internal controls to expedite year-end closing. The company has weak segregation of duties. As per SA 240, what should be your response?
      A Ignore if materiality is not breached Correct Answer Incorrect Answer
      B Document and proceed Correct Answer Incorrect Answer
      C Communicate to management Correct Answer Incorrect Answer
      D Assess risk of fraud and extend audit procedures Correct Answer Incorrect Answer
      E Withdraw from engagement Correct Answer Incorrect Answer

      Solution

      As per SA 240, overriding controls is a strong fraud risk indicator. Auditor must respond by revising risk assessment and performing additional procedures, especially around journal entries and estimates.

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