Question

An auditor discovers a likely fraud during an audit but concludes that the overall effect of the fraud is not sufficiently material to affect the audit opinion. The auditor should probably:

1) disclose the fraud to the appropriate level of the client's management.
2) disclose the fraud to appropriate authorities external to the client.
3) discuss with the client the additional audit procedures that will be needed to identify the exact amount of the fraud.
4) modify the audit program to include tests specifically designed to identify the fraud and its impact on the financial statements.

Answer 1

The auditor should disclose the fraud to the appropriate level of the client's management.

Step-by-step explanation:

The auditor should probably disclose the fraud to the appropriate level of the client's management. While the fraud may not be materially significant, it is still important to inform management so they can address the issue internally.