Question

After testing a client's internal control activities, an auditor discovers a number of significant deficiencies in the operation of a client's internal controls. Under these circumstances, the auditor most likely would:

A) Keep the deficiencies confidential and proceed with the audit as planned.

B) Communicate the deficiencies to the client's management and suggest improvements.

C) Ignore the deficiencies since they may not impact the financial statements significantly.

D) Immediately issue an adverse opinion on the financial statements.

Answer 1

The auditor should communicate the deficiencies to the client's management and suggest improvements. The auditor is most likely to choose option B) Communicate the deficiencies to the client's management and suggest improvements.

Step-by-step explanation:

When an auditor discovers significant deficiencies in a client's internal control activities, it is important to inform the client's management so that they are aware of the weaknesses and can take steps to improve them. This communication helps the client address the weaknesses and prevent possible inaccuracies or fraud in their financial statements.

By suggesting improvements, the auditor assists the client in strengthening their internal controls, which enhances the reliability of their financial reporting. This is an essential role of an auditor in ensuring the accuracy and integrity of financial statements.