Question

A document in an auditor's working papers includes the following statement: "Our audit is subject to the inherent risk that material errors and fraud, including defalcations, if they exist, will not be detected. However, we will inform you of fraud that comes to our attention, unless it is inconsequential." The above passage is most likely from a(an)

Answer 1

Part of an engagement letter.

Step-by-step explanation:

The purpose of an engagement letter is to define the business relationship between the auditor and the business. It should include the terms of the agreement and the cost of the services provided.

By including this statement the auditor is making it very clear that they are not responsible for any errors in the financial statements and that they are going to do their best in identifying those errors.