In recent years there has been a significant number if highly publicized cases of alleged or actual Management fraud involving the misstatement of public companies` financial statements. Although most managements possess unquestioned intergrity, some have fraudulently misstated their companies` reported financial condition and operating results.

Questions:

a. what are an auditor`s responsibilities under PCAOB standards to detect a material fraud?

b. what distinguishes fraudulent financial reporting from misappropriation of assets?

c. what three conditions generally are present when fraudulent financial reporting occurs (provide an example of one risk factor related to each condition)?

d. explain why an auditor must exercise a high level of professional skepticism when considering the risk of material misstatement due to fraud.

e. there is a presumption that what important aea is a fraud risk?

f what procedures should an auditor perform to address in more detail the risk of management override of controls?

g. how might the auditor respond to the results of the assessment of the risk of fraudulent financial reporting?

h. what should the auditor do when he/she has determined that there is evidence that a material fraud may exist?

i. in what circumstances may the auditor have a duty to disclose possible fraud to parties outside the entity (i.e. to parties other than the entity`s senior management and its audit committee)?

j. List three items that the auditor should document regarding his/her consideration of fraud.