ACCA Strategic Professional · Advanced Audit and Assurance (International) · Fraud and error
For the audit of Delta Pharma, the auditor must make inquiries about fraud risk. Under ISA 240, which inquiry is required?
ISA 240 requires the auditor to inquire of management about its fraud risk assessment and response processes, and of internal audit, where one exists, about procedures performed to detect fraud. Inquiries are required whether or not fraud indicators have been noticed, and are not limited to legal advisers.
- AInquiring of management about its process for identifying and responding to fraud risks, and of internal audit, if any, about procedures performed to detect fraudCorrect
- BInquiring only of the external legal advisers about suspected fraud
- CInquiring only of the audit committee, since management is the likely perpetrator
- DMaking no inquiries if the auditor has not personally identified any fraud indicators
Explanation
ISA 240 requires inquiries of management about their assessment of fraud risk and processes, and of internal audit where it exists, as well as of those charged with governance about their oversight. Inquiries are required regardless of whether indicators have been seen. Limiting them to legal advisers or only to the audit committee would not meet the standard.
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