1.

A. What do auditing standards require of the auditor regarding the assessment of material misstatement due to fraud?

B. Define professional Skepticism. Explain the two ways that auditor demonstrate/practice professional skepticism?

C. List and briefly explain the five (5) sources of information gathered to assess fraud risks

2.

A. Define and completely describe the effect that each of the following have on the audit of inventory

-- FOB

-- Consignment

B. Why is knowledge/understanding of an audit clients industry important when audit inventory?

C. What are three specific actions that can be taken by audit clients to artificially inflate the balance in the inventory account? How should the audit plan address these actions? What are the auditors options if these actions are discovered?