Define fraudulent financial reporting and give two examples that illustrate fraudulent financial reporting.
10-2 (OBJECTIVE 10-1) Define misappropriation of assets and give two examples of misappropriation of assets.
10-3 (OBJECTIVE 10-2) Give examples of risk factors for fraudulent financial reporting for each of the three fraud conditions: incentives/pressures, opportunities, and attitudes/ rationalization.
10-4 (OBJECTIVE 10-2) Give examples of risk factors for misappropriation of assets for
each of the three fraud conditions: incentives/pressures, opportunities, and attitudes/
rationalization.
10-5 (OBJECTIVE 10-3) What should the audit team consider in its planning discussion about fraud risks?
10-6 (OBJECTIVE 10-3) Auditors are required to make inquiries of individuals in the company when gathering information to assess fraud risk. Identify those with whom the auditor must make inquiries.
10-7 (OBJECTIVE 10-3) The two components of professional skepticism are a questioning mind and a critical assessment of the audit evidence. How do these components help an auditor distinguish an unintentional misstatement from an intentional (fraudulent) misstatement?
10-8 (OBJECTIVE 10-4) Discuss the importance of the control environment, or “setting the tone at the top,” in establishing a culture of honesty and integrity in a company.
10-9 (OBJECTIVE 10-4) Distinguish management’s responsibility from the audit committee’s responsibility for designing and implementing antifraud programs and controls within a company.
10-10 (OBJECTIVE 10-5) Describe the types of overall responses by auditors to address fraud risk.
