What action should an auditor take when they identify a false positive during their audit?

When an auditor identifies a false positive during an audit, the appropriate action is to document it and assess its implications. This approach is critical for several reasons.

Firstly, documenting a false positive provides a clear record of the anomaly and the auditor's observations. This documentation serves as evidence that the auditor conducted a thorough examination and ensures transparency in their audit process. It can be valuable for future reference, either for the current audit or for subsequent audits, helping to identify patterns or recurring issues.

Secondly, assessing the implications of the false positive is essential for understanding its potential impact on the overall audit results. The auditor needs to evaluate whether the false positive could suggest underlying issues, such as inadequate controls or errors in financial reporting, which may require further investigation. This assessment can help the auditor determine the next steps, including whether additional audit procedures are necessary.

By taking these actions, the auditor maintains a professional standard and ensures that the audit remains reliable and effective. Ignoring a false positive could lead to overlooking significant issues, while immediately informing the client without proper documentation might create unnecessary concern. Similarly, adjusting audit procedures without understanding the implications may not be warranted at this stage in the audit process.