During the audit of Tripti Chemicals Ltd., the auditors, Dishu & Co., identified unusual fluctuations in revenue while performing analytical…

CA Final · Advanced Auditing, Assurance and Professional Ethics · RTP · September 2025
During the audit of Tripti Chemicals Ltd., the auditors, Dishu & Co., identified unusual fluctuations in revenue while performing analytical review procedures. Upon further inquiry, they detected a misstatement in revenue recognition, which appeared to have been intentionally made by senior finance personnel. Although management contended it was a one-time error, the auditors suspected of potential fraud. In accordance with the Standards on Auditing, what would be the most appropriate course of action for the auditor?
(A) Rely on management's assurance and proceed with issuing an unmodified audit opinion.
(B) Perform additional analytical procedures only if the misstatement is material.
(C) Evaluate whether the misstatement indicates fraud, reassess the risk of material misstatement due to fraud, and consider implications for audit evidence and management representations.
(D) Immediately withdraw from the audit engagement without performing further procedures.

Suggested Answer and Working Notes:

Correct Answer: Option (C)

Evaluate whether the misstatement indicates fraud, reassess the risk of material misstatement due to fraud, and consider implications for audit evidence and management representations.

Topics: Standard on Auditing (SA), Quality Control, Audit Evidence

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