Fraud: Evaluation and communication

Question 1

Any fraud involving senior management, whether material or not, should be reported to

Answer 1

those charged with governance

Question 2

Fraud that has been detected by the auditor and which is immaterial to the financial statements (and which does not involve senior management) should be reported to

Answer 2

the appropriate level of management

Question 3

The existence of irregularities (fraud) is considered to be a severe problem in an audit due to potential ramifications for other areas of the audit. As a result, the auditor has a duty to disclose irregularities to the

Answer 3

SEC when the client reports an auditor change, to a successor auditor when the successor makes appropriate inquiries, and to a government funding agency from which the client receives financial assistance.