An auditor discovers a significant deficiency in internal control. What is the most appropriate action?
Correct answer: D. Communicate it to those charged with governance
- A. Ignore it if the accounts balance
- B. Remove the related transaction from the accounts
- C. Transfer responsibility to the cashier
- D. Communicate it to those charged with governance
Explanation
Significant control deficiencies should be communicated to management or those charged with governance, depending on their nature and severity. A balanced trial balance does not show that internal controls are effective.
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About Auditing
Auditing examines accounting records and financial statements to determine whether they present a reliable and fairly stated position. The subject covers audit objectives, internal controls, audit evidence, materiality, vouching, verification, working papers, auditor independence, audit reports, and the distinction between an audit and accounting or investigation.
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