How should discrepancies found during an audit be documented in the audit report?

Documenting discrepancies found during an audit is crucial for several reasons, including accountability, transparency, and the ability to track the resolution of issues. The most effective way to document discrepancies is by explicitly noting the condition and management's response. This approach provides a clear record of the findings and how management intends to address or has addressed those findings.

By explicitly documenting the condition, the audit report ensures that there is no ambiguity regarding what the discrepancy is and how it could impact the organization. Including management’s response adds another layer of accountability, as it shows that management acknowledges the issue and is either committed to resolving it or believes that no action is necessary. This transparency is essential for stakeholders who may rely on the audit findings for decision-making.

In contrast, documenting discrepancies only with management's verbal agreement lacks the necessary rigor because verbal agreements may not provide a reliable, lasting record. Recommendations for immediate remedial actions may be important, but the focus should first be on documenting what was found and how management responded. Indicating that further investigation is needed can be useful in certain contexts, but it doesn't adequately capture the immediate situation if discrepancies have already been identified. Overall, option B provides the most comprehensive and structured approach to ensuring that audit discrepancies are properly documented and can be referenced