CAF-8 · Chapter 11 · Question 4 of 10
During the audit, the auditor discovers a significant transaction with a company that was not disclosed as a related party by management. What is the auditor's first action?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Communicate the discovery to the other members of the engagement team and inquire why management failed to identify/disclose it.
Explanation
Communication within the team and inquiry of management are the first steps to determine if the failure to disclose was an oversight or an intentional attempt to conceal fraud.
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