While planning an engagement at Verdon Logistics, an internal auditor argues that because internal audit is not a fraud investigation unit, the engagement plan need not address fraud at all. The chief audit executive reviews this position. Which correction best reflects the auditor's obligation during planning?
- AThe auditor is correct, because fraud is entirely the remit of the forensic team and has no place in the planning of an engagement.
- BThe auditor must now personally lead a formal fraud investigation on this engagement in order to satisfy due professional care.
- CConsidering the potential for fraud is part of due professional care, so the plan should weigh fraud risk even though the auditor need not investigate every engagement. Correct
- DFraud need only be considered after fieldwork ends, when the engagement results are being reported to the audit committee.
Why A is wrong: It seems consistent with role boundaries, but it ignores that considering fraud potential is part of due professional care, so fraud cannot be absent from planning.
Why B is wrong: This overstates the duty; due professional care requires considering fraud risk, not leading an investigation on every engagement where fraud is possible.
Why C is correct: Correct: the auditor must consider fraud potential when planning as part of due professional care, while not being obliged to conduct a full fraud investigation on each engagement.
Why D is wrong: Reporting is too late; fraud risk is a planning input, and deferring it to the reporting stage defeats the purpose of considering it at all.