Forensic 9 - they need to ‘educate’ management about...

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Question 1 2 out of 2 points What does SAS No. 99 require the auditor who suspects financial statement fraud to do? Answer Selected Answer: SAS 99 defines fraud as an intentional act that results in a material misstatement in financial statements. There are two types of fraud considered: misstatements arising from fraudulent financial reporting and misstatements arising from misappropriation of assets. The standard describes the fraud triangle. Generally, the three ‘fraud triangle’ conditions are present when fraud occurs. First, there is an incentive or pressure that provides a reason to commit fraud. Second, there is an opportunity for fraud to be perpetrated. Third, the individuals committing the fraud possess an attitude that enables them to rationalize the fraud. planning the audit. SAS 99 requires auditors to ask management questions about their awareness and understanding of fraud. Auditors will then make a decision as to whether
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Unformatted text preview: they need to ‘educate’ management about fraud and the types of controls that will deter and detect fraud. The standard also requires auditors to make inquiries of the audit committee, internal audit personnel and others within the entity. Correct Answer: When the auditor believes that the risk of misstatement due to fraud is higher than usual, she should exercise a high degree of professional skepticism and that this attitude should translate into more extensive testing of those areas identified as susceptible to fraudulent misstatement. Response Feedback: When the auditor believes that the risk of misstatement due to fraud is higher than usual, she should exercise a high degree of professional skepticism and that this attitude should translate into more extensive testing of those areas identified as susceptible to fraudulent misstatement Wednesday, February 29, 2012 9:38:10 AM EST OK...
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