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CS Professional · Internal and Forensic Audit · Reporting under Internal Audit

During a branch review at Sagar Foods Ltd, the internal auditor notices signs of suspected fraud and reports it promptly. According to SA 610 (Revised), how can the statutory auditor use communication of such information from the internal audit function?

The statutory auditor can take such information into account when identifying and assessing risks of material misstatement, including risks due to fraud under SA 240. Internal audit communication of suspected fraud is therefore valuable input to planning, not something to ignore or a reason to halt procedures.

  1. AIgnore it, since fraud is only the internal auditor's concern
  2. BTake it into account in identifying and assessing risks of material misstatement, including due to fraudCorrect
  3. CTreat it as proof that the financial statements are free of misstatement
  4. DStop all planned audit procedures on the branch

Explanation

The text says information about actual, suspected or alleged fraud, or heightened risk of misstatement, can be taken into account in identifying and assessing risks of material misstatement, including due to fraud under SA 240. It is not ignored, not proof of accuracy, and does not end procedures.

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