incentive or pressure for management to commit fraud b provide the opportunity

Incentive or pressure for management to commit fraud

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incentive or pressure for management to commit fraud, (b) provide the opportunity for fraud to be perpetrated, and (c) indicate a culture or environment that enables management to rationalize fraudulent acts. (2) How management could perpetrate and conceal fraudulent financial reporting. (3) How anyone might misappropriate assets of the entity.(4) How the auditor might respond to the susceptibility of material misstatements due to fraud.Inquiries of management. These inquiries should address whether management has knowledge of any fraud or suspected fraud within the company. Auditors should also inquire about management's process of assessing fraud risks, the nature of fraud risks identified by management, any internal controls implemented to address those risks, and any information about fraud risks and related controls that management has reported to the audit committee or others charged with governance.Risk factors. The auditor must evaluate whether fraud risk factors indicate incentives or pressures to perpetrate fraud, opportunities to carry out fraud, or attitudes or rationalizations usedto justify a fraudulent action.Analytical procedures. Auditors must perform analytical procedures during the planning and completion phases of the audit to help identify unusual transaction or events that might indicate the presence of material misstatements in the financial statements. Analytical procedures include ratio analysis, horizontal analysis, and vertical analysis.Other procedures. Auditors should consider all information they have obtained in any phase or part of the audit as they assess the risk of fraud. Information about management's integrity andhonesty, inquires and analytical procedures, and information considered in assessing inherent andcontrol risks, may lead to auditor concerns about the likelihood of misstatements due to fraud.Terms: Sources of information to assess fraud risks; inquiries of managementDiff: ChallengingObjective: LO 10-3AACSB: Reflective thinking 11) In vertical analysis, the account balance is compared to the previous period, and the percentage change for the period is calculated.Answer: FALSETerms: Analytical proceduresDiff: ModerateObjective: LO 10-3AACSB: Reflective thinking
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12) Information and idea exchange sessions by the audit team are required by current auditing standards.Answer: TRUETerms: Information and idea exchange by audit team sessions required by current audit standardsDiff: ModerateObjective: LO 10-3AACSB: Reflective thinking 13) Upon discovering information that indicates a material misstatement due to fraud, the auditormust assume that the misstatement is an isolated incident.Answer: FALSETerms: Assessment of fraud riskDiff: ModerateObjective: LO 10-3AACSB: Reflective thinking 14) The presence of fraud risk factors increases the likelihood of fraud and may suggest that fraud is being perpetrated.
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