25. Who is most likely to perpetrate fraudulent financial reporting? A) members of the board of directors production employees C) management of the company D) the internal auditors 26. Determine from the following the factor that would most likely elevate the auditor's concern about the risk of financial statement fraud A) company cannot borrow debt capital without restrictive covenants B) company finds it difficult to sell equity capital for expansion C) company has a significant portion of liquid assets on its balance sheet D) company reports substantial net income but ever decreasing cash flow from operations 27. Misappropriation of assets is normally perpetrated at the lowest levels of the organization hierarchy A) True B) False 28. Which of the following is not a factor that relates to opportunities to commit fraudulent financial reporting? A) Lack of controls related to the calculation and approval of accounting estimates B) Ineffective oversight of financial reporting by the board of directors. C) Management's practice of making overly aggressive forecasts. D) High turnover of accounting, internal audit, and information technology staft. 29. Auditor's need to exhibit professional skepticism when auditing a client. This auditing standard is best expressed by which of the following? A) the auditor neither assumes dishonesty or honesty of management B) the auditor assumes dishonesty of management C) the auditor assumes honesty of management D) the auditor assumes management lacks integrity immaterial affect on the financial statements taken as whole. In this case the auditors sho A) plan on additional audit procedures to determine the exact amount of the fraud. B) communicate with legal authorities as to the identity of the fraudsters. C) disclose the fraud to the appropriate level of management or to the audit committee D) call the whistleblower hotline and name the suspected individuals. 30. While performing their audit, the audit team uncovers fraud that is likely to have an 31. Which of the following is not a likely source of information to assess fraud risks? A) Communications among audit team members