The following questions concern the auditor’s responses to the possibility of fraud.
a. When fraud risk factors are identified during an audit, the auditor’s documentation
should include
The Risk Factors
IdentifiedWhich of the following is least likely to suggest to an auditor that the client’s management may have overridden internal control?
The Auditor’s Response to The
Risk Factors Identified
(1) Yes Yes
(2) Yes No
(3) No Yes
(4) No No
334Part 2 / THE AUDIT PROCESS
b. If an independent audit leading to an opinion on financial statements causes the auditor to believe that a material misstatement due to fraud exists, the auditor should first (1) request that management investigate to determine whether fraud has actually
occurred.
(2) consider the implications for other aspects of the audit and discuss the matter
with the appropriate levels of management.
(3) make the investigation necessary to determine whether fraud has actually
occurred.
(4) consider whether fraud was the result of a failure by employees to comply with
existing controls.
c. Which of the following is least likely to suggest to an auditor that the client’s management may have overridden internal control?
(1) There are numerous delays in preparing timely internal financial reports.
(2) Management does not correct internal control weaknesses that it knows about.
(3) Differences are always disclosed on a computer exception report.
(4) There have been two new controllers this year
