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AUDITING - CHAPTER 6 - AUDITING CHAPTER 6 1 When the...

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AUDITING - CHAPTER 6 1. When the auditor's regular examination leading to an opinion on financial statements discloses specific circumstances that make him suspect that fraud may exist and he concludes that the results of such fraud, if any, could not be so material as to affect his opinion, he should a.refer the matter to the appropriate representatives of the client with the recommendation that it is to be pursued to a conclusion. b. immediately extend his audit procedures to determine if fraud has occurred and, if so, the amount thereof. c.reach an understanding with the client as to whether the auditor or the client, subject to the auditor's review, is to make the investigation necessary to determine whether fraud has occurred and, if so, the amount thereof. d. make a note in his working papers of the possibility of a fraud of immaterial amount so as to pursue the matter next year. 2. When engaged to prepare unaudited financial statements, the CPA's responsibility to detect fraud a.is limited to informing the client of any matters that come to the auditor's attention which cause the auditor to believe that an irregularity exists. b. is the same as the responsibility that exists when the CPA is engaged to perform an audit of financial statements in accordance with generally accepted auditing standards. c.arises out of the CPA's obligation to apply procedures which are designed to bring to light indications that a fraud or defalcation may have occurred. d. does not exist unless an engagement letter is prepared. 3. An auditor should recognize that the application of auditing procedures may produce evidential matter indicating the possibility of errors or irregularities and therefore should a.plan and perform the engagement with an attitude of professional skepticism. b. not depend on internal accounting control features that are designed to prevent or detect errors or irregularities. c.design audit tests to detect unrecorded transactions. d. extend the work to audit most recorded transactions and records of an entity. 4. Most illegal acts affect the financial statements a.directly. b. only indirectly. c.both directly and indirectly. d. materially if direct; immaterially if indirect. 5 . After the auditor has completed all the procedures, it is necessary to combine the information obtained to reach an overall conclusion as to whether the financial statements are fairly presented. This is a highly subjective process that relies heavily on a.generally accepted auditing standards. b. the AICPA's Code of Professional Conduct. c.generally accepted accounting principles. d. the auditor's professional judgment.
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