ACCA Strategic Professional · Advanced Audit and Assurance (International) · Specific assignments
Kestrel & Co is engaged by the board of Orlan Ltd to investigate suspected misappropriation of inventory by a warehouse manager. The board intends to use the findings in possible court proceedings. Which statement best describes how the engagement differs from a statutory audit?
A forensic investigation has a specific objective set out in the engagement terms, and the evidence must be gathered and preserved so it can be used in legal proceedings. It is not a statutory audit expressing an opinion on financial statements, and written terms are still required.
- AIt is a forensic investigation with a specific objective, so the scope is set by the engagement terms and focuses on gathering evidence that can be used in legal proceedingsCorrect
- BIt must follow ISA 700 and conclude with an opinion on whether the financial statements give a true and fair view
- CMateriality is set by reference to financial statement totals, and the work is limited to sampling
- DBecause fraud is suspected, the firm need not agree terms of engagement in writing
Explanation
A forensic investigation has a specific, agreed purpose and its scope is defined in the engagement letter. Evidence must be gathered and preserved to a standard suitable for court. It is not an audit of financial statements, so ISA 700 opinion and general-materiality sampling do not apply, and written terms remain essential.
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