Question

Which of the following statements is correct regarding audit engagement workpaper documentation for a fraud investigation?

1 All incriminating evidence should be included in the workpapers.
2 All important testimonial evidence should be reviewed to ensure that it provides sufficient basis for the conclusions reached.
3 If interviews are held with a suspected perpetrator, written transcripts or statements should be included in the workpapers.

A. 2 only.
B. 2 and 3 only.
C. 1, 2, and 3.
D. 1 only.

Answer 1

The correct statements regarding audit engagement workpaper documentation for a fraud investigation are that important testimonial evidence must be reviewed for sufficient basis of conclusions and transcripts of interviews should be in the workpapers, not necessarily all incriminating evidence.

Step-by-step explanation:

Regarding audit engagement workpaper documentation for a fraud investigation, the correct statement is that all important testimonial evidence should be reviewed to ensure that it provides a sufficient basis for the conclusions reached, and if interviews are held with a suspected perpetrator, written transcripts or statements should be included in the workpapers.

However, not all incriminating evidence necessarily needs to be included; it must be relevant and material to the case. The inclusion of all pertinent information and testimonies provides a robust and credible foundation for the investigation and supports the conclusions drawn.

Meticulous documentation is crucial in fraud investigations to maintain the integrity of the evidence, provide a clear understanding of the investigative process, and build a convincing case. This includes tracking all sources of information and crediting them in the report. Such thoroughness is essential for ensuring that the investigation can withstand legal scrutiny and that the evidence can be presented effectively in a court of law, should it reach that stage.