Eren, CPA is the engagement partner on the Financial Statement Audit of Eldia Vaccine Services Co. (EVS) for the year ended December 31,2020. On January 4, 2021, Jean, the Senior Associate assigned to the engagement, had the following conversion with Eren concerning the Planning Phase of the Audit: The Minutes of the Meeting is as follows: Jean: Mostly. I still have a lot of work for assessment for fraud risk Eren: Why? Our error and irregularities program from last year is still effective. It is passed peer review from several audit firms several times. Besides, we do not have specific duties regarding fraud. If we find during the audit, then we will deal with it. Jean: I do not think so. The new CEO, Reiner, has almost no salary, mostly bonuses and stock options isnt that a concern? Eren: NO! Reiners Employment contract was approved by the board of directors just three months ago. It was passed unanimously in the minutes of the meeting file. Jean: I guess so, but Reiner told those stock analysts that EVSs earnings would increase 30% Next year. Despite the Pandemic. Can he even keep that promise? Eren: Who knows we are auditing the 2020 FS not 2021. Reiner will probably amend those forecast during the quarters of next year Jean: Sure, but all this may change our other Audit Programs. Eren: No, it wont, if ever we would just extend our procedures or just report to the Audit Committee of our findings. Jean: What would they do? Berthold is the audit committees chair, and remember Berthold Hired Reiner. They have been best friends for years. besides Reiner is calling all the shots now. Marcel, the old CEO is still on the board, but Marcel is never around. Marcels even been skipping the board meetings. No one can stand up to Reiners decisions. Eren: that is nothing new. Marcel was like that years ago. He fought with Ymir the Predecessor Auditor. 3 years ago, Ymir told Marcel how ineffective the IA department was then. Next thing you know Ymir was out and I was hire. Why bother? Im just happy those Internal Auditors dont get in my way of the Audit. Bottom line is Fair presentation of FS is our main objective nothing more nothing less. Jean: But what about the lack of segregation of duties? The Clerk can write checks for her personal transactions Eren: Sure, that is a reportable condition every year and probably will this year. But were talking cost-effectiveness here not fraud audit. We just have to do lots of testing on cash disbursements and report it again. Jean: What about the big layoffs coming up next month? based on my inquiry, everyone knows about that even the employees Eren: I know it is the worst kept secret of EVS, but we dont have to consider that now. Even if it happens it will only improve next years financial results. Marcel should have let those people go years ago. Lets face it, how else can Reiner come close to a 30% increase in earnings next year?

Which of the following does not describe a fraud risk factor that is indicated in the dialogue above?

A. Reiner's Compensation is primarily based on bonuses and options

B.Aggressive and Unrealistic forecast despite the situation

C.Reiner hiring was approved by a Unanimous vote of the board of directors

D.Reiner is close with Berthold the Audit Committee chair

Which of the following would most likely describe the fraud risk factors that is indicated in the dialogue above?. S

A. Berthold is the Chair of the Audit Committee and is Friends with Reiner

B. Disputes with Board of Directors and predecessor auditor

C. The Financial Statements were correct on the Prior years

D. Existence of the Internal Audit Committee is led by Berthold

Which of the following least likely describe Eren's misconceptions regarding the Consideration of Fraud in the Audit of EVS's Financial Statement that are contained in the Dialogue Above?.

A.Lack of Concern about the Audit Program Passing peer review

B. Lack of Concern over the Approval of Reiner's Employement

C. Lack of Concern over Marcel being the Old CEO

D. Lack of Concern about weak policies pertaining to the Salary of the CEO 3434,

Is Eren Negligent with his responses?.

A. No, Possible misstatements based on the dialogue of Eren seem to be of Immaterial value and we base our choices by Judgement

B. Yes, Despite using Judgement in doing the Decision making, Eren has clearly ignored Several Red Flags in the Conduct of this Audit

C. No, as he appropriately planned the Audit and Considered that fraud is immaterial

D. Yes, The Judgement that Eren has continuously done is wrong as Misstatements despite the Amount should be reported immediately

What should be documented in this Dialogue?.

A. Auditor's Response to these Fraud Risk

B. Fraud Risk Factors identified

C. All of these

D. Conversation with the Predecessor Auditor