The auditor also assesses fraud risk as part of risk assessment procedures performed during audit planning. You have been invited by the audit partner on the Pinnacle engagement to participate in the fraud brainstorming session conducted as part of audit planning. The purpose of Part IV is to identify fraud risks and the response to these fraud risks in the audit of Pinnacle Manufacturing

Required

a. Use the fraud triangle and information from Parts I through III of this case to identify incentives/pressures, opportunities, and attitudes/rationalizations for Pinnacle to engage in fraudulent financial reporting.

b. Identify one or more fraud risks that you believe exist due to the nature of Pinnacles industry. Indicate the accounts most likely to be affected by the identified fraud risks.

c. Auditors must generally identify a fraud risk for revenue recognition. Indicate at least two ways thatPinnacle might engage in revenue recognition fraud. Identify the specific nature of the potential fraud, and an audit procedure that you would perform to determine whether fraud is occurring.