Audit and Assurance Practice Exam 2025 – The Complete All-in-One Guide for Exam Success!

Fraud significantly impacts the audit process because it can lead to misstatements in the financial statements, which directly increases the audit risk. When fraud occurs, there is a higher likelihood that the financial information presented by the management is not accurate, specifically due to intentional misrepresentation or omission of relevant facts. This misrepresentation can stem from various forms of fraud, including asset misappropriation or financial statement fraud.

As a consequence of the potential for misstatements, auditors must alter their audit procedures to address the heightened risks associated with fraud. This may involve more extensive testing, increased skepticism, and thorough corroborating evidence collection to ensure that the financial statements present a true and fair view of the entity’s financial position. Therefore, the recognition of fraud risks necessitates a more rigorous audit approach and professional skepticism, emphasizing the importance of identifying and addressing these risks effectively during the audit process.