Question

Provide a well detailed answer!!

Auditors are required to make inquiries with individuals in the company when gathering information to assess fraud risk. List those with whom the auditor must make inquiries.

Answer 1

Answer:

As per Standard on Auditing Auditor should assess the risk of material misstatement whether due to fraud or error in the organization. Much of the information is obtained by the auditor through an inquiry from management or others with the individuals in the company.

Inquiries directed towards those charged with governance may help the auditor to understand the environment in which the financial statements are prepared.

Inquiries directed towards internal audit performed during the year relating to the design & effectiveness of the entity internal control and whether management has satisfactorily responded to findings from those procedures.

List of those individuals with whom the auditor must make inquiries for gathering the information to assess fraud risk:

Management: The auditor should conduct inquiries with management regarding internal control & it's an environment so that level of risk & fraud can be determined easily.

The auditor should ask the management regarding the following:

• It's Operation
• It's Operation and governance structure
• The types of investment that the entity is making and plan to make & the way the entity is financed.
• Entity application of accounting policies, including the reason

Employees: The auditor should ask the employees of the organization regarding the work culture of that entity, pay scale of that entity, whether compensation to employees is made fairly or not.

Those Charged with governance: The auditors should ask the material misstatements & risk factors from those charged with governance.

Apart from the individuals mentioned above auditor should make the inquiry regarding risk & fraud from other individuals as well.