[Anonymous]

So I got this question from Ninja and I see two right answers. Communication doesn’t have to be in writing, and account DOES need to report matters related to fraud, even if inconsequential. But since I can only pick 1, I got it wrong. I picked A, it said only answer correct is C.

Here is what AU-C 240.A67 says:
“.A67 When the auditor has obtained evidence that fraud exists or may
exist, it is important that the matter be brought to the attention of the appropriate
level of management as soon as practicable. This is true even if the
matter might be considered inconsequential (for example, a minor defalcation
by an employee at a low level in the entity’s organization).

I seem to get these Ninja question ever so often. Am I missing the point on this question or is it flat out wrong? Is it because some of the answers use the word “Accountant” and not auditor? Frustrating!

Which of the following is a false statement regarding communications to management and others that fraud or noncompliance with laws and regulations may have occurred?

A. The accountant need not report matters that are clearly inconsequential.
B. When matters regarding fraud or noncompliance involve senior management, the accountant should report the matter to an individual or group at a higher level with the entity, such as a manager (owner) or the board of directors.
C. The communication must be in writing.
D. When matters regarding fraud or noncompliance involve the owner of the business, the accountant should consider resigning from the engagement.

[Anonymous]

C is the best answer because it does not have to be in writing if inconsequential as the code states. It could be done verbally. I hope you are not misreading the question. The question is asking to select a false statement.

[dcstaples]

Seems to be a GOTCHA question. I would have chosen A as well, since they emphasize fraud is a serious matter so much. Just remember, for the exam, fraud only matters when it is material or committed by management. An employee that steals $20 doesn't matter. In real life, would you bring it to the attention of management? Yes. However, we're only concerned about the Financial Statements and what will impact them in this case.

That's how I rationalized it, at least.

AUD - NINJA in Training
BEC - 86
FAR - 89
REG - 87

Best of luck on the exam!!!

[Anonymous]

That's a really good way to think about it. Thanks for the response.

[Author]

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