Skip to content

CA Final · Advanced Auditing, Assurance and Professional Ethics · General Auditing Principles and Auditors Responsibilities

In auditing Ganga Retail Ltd, the auditor wants to explain to the audit committee how fraud differs from error. Which distinguishing factor is correct under SA 240?

The distinguishing factor between fraud and error is whether the underlying action that results in the misstatement is intentional or unintentional. Size, location in the financial statements or the person who detects it does not decide whether a misstatement is fraud or error.

  1. AWhether the amount involved in the misstatement exceeds materiality
  2. BWhether the misstatement arose in the income statement or the balance sheet
  3. CWhether the underlying action resulting in the misstatement is intentional or unintentionalCorrect
  4. DWhether the misstatement was detected by the auditor or by the internal auditor

Explanation

SA 240 states that the distinguishing factor between fraud and error is whether the underlying action causing the misstatement is intentional or unintentional. Materiality, location in the statements or who detects it do not define fraud. Materiality only decides whether the auditor is concerned with it.

Did you get it right without looking?

One question tells you little. A timed set on General Auditing Principles and Auditors Responsibilities shows your real accuracy, how long you take and where you lose marks.

Practise General Auditing Principles and Auditors ResponsibilitiesFree diagnostic mock

More General Auditing Principles and Auditors Responsibilities questions