Audit and Assurance Practice Exam 2025 – Complete Prep Resource

The discovery of discrepancies in financial statements serves as a critical trigger for reassessing risk during an audit. When auditors encounter errors, inconsistencies, or unexpected variances in the financial data, it raises concern regarding the reliability of the information presented. These discrepancies can indicate issues such as potential fraud, inadequate internal controls, or oversight errors. Consequently, the auditor may need to elevate the level of concern regarding the financial statements' integrity and adjust their audit strategy accordingly. This could involve increasing the extent of testing, revisiting the assessment of materiality, or dedicating more resources to investigating the identified issues.

Recognizing discrepancies could lead to a broader understanding of the entity's operations, prompting auditors to evaluate other aspects of the audit plan, such as the risk of material misstatement. The implications of these findings compel auditors to remain vigilant and responsive to emerging risks, ensuring that the audit remains adequate and effective in achieving its goals.