An auditor developing fraud-risk responses at the assertion level decides to modify their planned audit procedures. Which of the following best explains the auditors risk response?
A. The auditor believes they can obtain more sufficient evidence.
B. The auditor believes they can obtain more persuasive evidence.
C. The auditor may have insufficient time to complete the originally planned tests.
D. The auditor believes they can obtain more reliable evidence.
The correct answer and explanation is:
The correct answer is B. The auditor believes they can obtain more persuasive evidence.
When an auditor modifies their planned audit procedures in response to fraud risk, the aim is often to obtain more persuasive evidence. This evidence is more likely to support the auditor’s conclusions about the presence or absence of fraud. Fraud risk responses typically involve adjusting audit procedures to gather information that is not just sufficient but compelling enough to mitigate the risks of fraudulent activity.
Explanation:
Auditors modify their planned procedures at the assertion level to address specific risks, such as fraud, that might affect the financial statements. Fraud is inherently difficult to detect because it involves intentional misstatements or omissions. As such, obtaining persuasive evidence is critical. Persuasive evidence means evidence that is both relevant and reliable, and which provides a stronger basis for the auditor’s conclusions.
In a fraud-risk scenario, modifying procedures might involve performing more detailed testing, examining unusual transactions, conducting interviews, or using forensic techniques. The idea is not only to gather evidence that meets the minimum requirements (sufficient) but also to ensure that the evidence collected is strong and convincing enough to identify fraud if it exists.
For example, the auditor might shift from relying on automated reports to conducting interviews with management or reviewing transactions at a more granular level. These modified procedures can help uncover potential fraud by ensuring that the evidence is not only abundant but compelling enough to provide a solid foundation for the audit opinion.
This contrasts with the other options:
- A (obtaining more sufficient evidence) is not the main goal, as sufficient evidence alone may not fully address fraud risks.
- C (insufficient time) could lead to a reduction in audit procedures but doesn’t directly relate to fraud-risk responses.
- D (obtaining more reliable evidence) focuses on reliability but doesn’t specifically highlight the need for evidence that directly responds to the risk of fraud.