CFE – Fraud Prevention and Deterrence — Question 48

A government auditor is conducting a financial statement audit of a public-sector entity in accordance with the International Standards of Supreme Audit Institutions (ISSAI) Which of the following is TRUE regarding the auditor’s consideration of fraud during this engagement?

Answer options

• A. In addition to fraud, the auditor should remain alert to potential occurrences of abuse during the audit
• B. The auditor has the automatic ability to withdraw from the audit engagement if fraud is found
• C. The requirements found in International Standard on Auditing (ISA) 240 do not apply to the engagement
• D. The objectives of the audit are likely narrower than those of a private-sector financial statement audit

Correct answer: B

Explanation

The correct answer is B, as auditors have specific rights to withdraw from engagements if they encounter fraud, ensuring integrity in the audit process. Option A is incorrect because while abuse should be considered, it does not directly relate to the automatic withdrawal capability. Option C is wrong since ISA 240 does apply to public-sector audits concerning fraud considerations. Option D is also incorrect as public-sector audits can have broader objectives compared to private-sector audits.