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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Reporting on other assignments

An audit firm is engaged by the audit committee of Calder Ltd to investigate suspected misappropriation of inventory by warehouse staff. The report may be used in criminal proceedings. Which statement about this forensic engagement is correct?

The firm should preserve the integrity and chain of custody of evidence and document its work carefully, because the findings may be used in criminal proceedings. Forensic work targets specific allegations and differs from audit sampling, and suspects must not be alerted.

  1. AThe firm should design procedures to preserve the integrity and chain of custody of evidence, since it may be used in courtCorrect
  2. BThe firm should apply the same sampling-based approach as an audit so that the conclusion is reasonable assurance on the financial statements
  3. CThe firm need not document its procedures because the report will be oral
  4. DThe firm should share draft findings with the suspected staff so that they can remove sensitive documents

Explanation

Forensic work is directed at specific allegations and may be tested in legal proceedings, so evidence handling, documentation and independence from the suspects are vital. An audit-style sampling approach does not suit a targeted investigation. Sharing drafts with suspects risks tampering and destruction of evidence.

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