What should auditors do if they suspect fraud during an audit?

When auditors suspect fraud during an audit, they should extend audit steps and procedures as necessary. This is because auditors have a professional responsibility to gather sufficient and appropriate evidence to support their findings. When there is a suspicion of fraud, it is crucial to investigate further to determine the extent of the issue and to gather evidence that may support or refute the suspicion. This may involve increasing the scope of the audit, adjusting sampling techniques, or performing additional testing tailored to specific areas of concern.

By extending the audit procedures, auditors can better assess the situation and ensure that they are complying with auditing standards, which require them to consider the possibility of fraud in their evaluations. Through this thorough approach, auditors have the opportunity to provide a more accurate conclusion about the financial statements and help the organization address potential weaknesses that might have allowed the fraud to occur.

Taking immediate action, such as terminating the audit or reporting findings to an external agency without first doing thorough investigative work, can lead to incomplete conclusions and may not serve the interests of the stakeholders involved. Consulting legal counsel might be necessary in certain situations, but it should typically follow the auditors’ comprehensive examination of the circumstances surrounding the suspected fraud before any definitive actions are taken.