DR= 0.06/0.65= 9.2% 5.You are the senior on an audit of Two Be Gone, a large public company. The company recently completed an acquisition of its fifth largest competitor. What risks might this present? How will you, the auditor, respond to these risks (i.e. what actions should you take)? 6. In one sentence each, define misstatements arising from fraudulent financial reporting and misstatements arising from misappropriation of assets. Misstatements arising from misappropriation of assets involve the theft of an entity’s assets where the theft causes the financial statement to be misstated. Misstatements arising from fraudulent financial reporting are intentional misstatements or omissions of amounts or disclosures in financial statements intended to deceive financial statement users. 7. DATRIX, Inc., a Fortune 500 company, has been experiencing poor performance. Industry analysts have been issuing negative reports and the company's stock price has been steadily declining. As an auditor, what would concern you about the audit engagement of DATRIX, Inc. An auditor should be concerned because of the apparent incentive the management of DATRIX may have to commit financial statement fraud. For instance, the company’s management may be tempted to change accounting estimates or use other means to falsely increase the company’s book profits. The auditor should exercise professional skepticism in this engagement and she should carefully evaluate the risk of financial statement fraud. 8.During the course of the audit of FF Financial, you find that some accounting entries have been altered.You believe this may be the result of management fraud and you have determined thatthe effect of this could be material to the financial statements. What steps should youtake in response to the accounting entries and your concern about management fraud?