Answered step by step
Verified Expert Solution
Question
1 Approved Answer
a. Which of the following circumstances most likely would cause the auditor to suspect that there are material misstatements in the entity's financial statements? 1.
a. Which of the following circumstances most likely would cause the auditor to suspect that there are material misstatements in the entity's financial statements? 1. The entity's management places no emphasis on meeting publicized earnings projections. 2. Significant differences between the physical inventory count and the accounting records are not investigated. 3. Monthly bank reconciliations ordinarily include several large outstanding checks. 4. Cash transactions are electronically processed and recorded, leaving no paper audit trail. b. Which of the following statements describes why a properly designed and executed audit may not detect a material misstatement in the financial statements resulting from fraud? O 1. Audit procedures that are effective for detecting an unintentional misstatement may be ineffective for an intentional misstatement that is concealed through collusion. 2. An audit is designed to provide reasonable assurance of detecting material errors, but there is no similar responsibility concerning fraud. 3. The factors considered in assessing control risk indicated an increased risk of intentional misstatements, but only a low risk of unintentional errors in the financial statements. 4. The auditor did not consider factors influencing audit risk for account balances that have effects pervasive to the financial statements as a whole. c. Prior to, or in conjunction with, the information-gathering procedures for an audit, audit team members should discuss the potential for material misstatement due to fraud. Which of the following best characterizes the mindset that the audit team should maintain during this discussion? 1. Presumptive 2. Judgmental 3. Criticizing 4. Questioning
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started