Final answer:
If gaps in prenumbered sales invoices are found during an audit, the auditor may be facing a completeness issue, implying potential revenue understatements. The auditor would need to investigate the cause and ensure all sales are recorded accurately. If the auditor identifies gaps in the sequence of prenumbered sales invoices while auditing revenues, it may indicate a completeness problem.
Step-by-step explanation:
If an auditor auditing revenues identifies gaps in the sequence of prenumbered sales invoices, the problem they may be facing is likely a completeness problem. This implies that there could be unrecorded sales or transactions that have not been documented properly, leading to potential understatements in revenue. It is crucial for all sales to be recorded to ensure that the financial statements are complete and accurate.
Addressing this issue typically involves tracing a sample of recorded sales transactions back to the supporting documentation to ensure all sales that occurred are recorded and that the prenumbered invoices account for all sales transactions during the period. If invoices are missing, the auditor must investigate further to determine the reason for the discrepancies and assess the risk of material misstatement due to fraud or error.
Regarding options 3 and 4 from the question; the decision whether to involve the internal audit function or consider withdrawing from the engagement would be based on additional context and the severity of the issues found. If the issue appears to be due to an error and can be resolved, it is unlikely that an auditor would withdraw. However, if there is suspicion of fraud or the issue is extremely severe and the client is uncooperative, escalating the situation might be warranted.