Final answer:
An auditor evaluates whether analytical procedures indicate a risk of material misstatement due to fraud.
Step-by-step explanation:
An auditor has the responsibility to evaluate whether analytical procedures indicate a previously unrecognized risk of material misstatement due to fraud. Analytical procedures are used to assess the reasonableness of financial information and to identify any unusual relationships or transactions that may indicate fraudulent activity.
For example, if an auditor notices a significant increase in revenue without a corresponding increase in expenses, it could be an indication of fictitious sales or improper recognition of revenue.
The auditor may perform these analytical procedures as substantive tests, which are used to obtain audit evidence about specific assertions related to account balances or transactions, or during the overall review stage, which is a final assessment of the financial statements as a whole.