Who has primary responsibility for preventing and detecting fraud in an audited entity?
Correct answer: A. The entity’s management and those charged with governance
- A. The entity’s management and those charged with governance
- B. The external auditor alone
- C. The entity’s tax consultant alone
- D. The shareholders acting individually
Explanation
Management and those charged with governance are primarily responsible for designing controls and managing the risk of fraud. The external auditor considers fraud risk and audits the statements, but does not replace management’s responsibility.
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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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