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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Fraud and error

Auditor Mei concludes that a management fraud has caused a material misstatement that the client refuses to correct. Management also withholds access to records, so Mei cannot obtain sufficient appropriate evidence on the extent of the fraud. Which is the most appropriate auditor's report outcome under ISA 705 and ISA 240?

If management blocks access and the possible effects of the fraud are material and pervasive, the auditor should disclaim an opinion, or withdraw where possible. An emphasis of matter or key audit matter cannot replace a modification, and qualification suits only material but not pervasive effects.

  1. ADisclaim an opinion, or withdraw where possible, if the possible effects are material and pervasiveCorrect
  2. BIssue an unmodified opinion with an emphasis of matter paragraph
  3. CIssue a qualified opinion because management's refusal always makes effects limited
  4. DIssue an unmodified opinion and include a key audit matter only

Explanation

Inability to obtain evidence because of management-imposed limitation, where possible effects are material and pervasive, leads to a disclaimer, or withdrawal if practicable. An emphasis of matter or key audit matter cannot substitute for a modified opinion. A qualified opinion is only appropriate if effects are material but not pervasive, which cannot be assumed here.

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