Question 5 (20)

Fraud is one of the most critical issues that auditors face. Please answer the following questions regarding fraud.

a. Identify and explain the two fundamental categories of fraud discussed in class. Which type of fraud is the primary concern of the auditor and why? (8)

b. If the auditor concludes that a high risk of fraud exists for an audit client, explain how the auditor should respond to this risk. (12)