What Should an Audit Team Do When It Discovers That

question 64

Multiple Choice

What should an audit team do when it discovers that fraud risk factors are present on an audit engagement?

• A) Retract from the client and inform regulatory bodies.
• B) Modify procedures to actively search for the existence of fraud.
• C) Reduce the amount of evidence required and resort to management inquiry.
• D) Turn the audit over to forensic accountants.

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Definitions:

Expected Frequency

The theoretical number of times an outcome is anticipated to occur in a statistical experiment based on the total number of observations and the probabilities of outcomes.

Uniformly Distributed

Describes a distribution where all outcomes are equally likely to occur.

Capital Punishment

A legal penalty where a person is sentenced to death by the state as punishment for a crime.

Poisson Distribution

A discrete probability distribution expressing the probability of a given number of events occurring in a fixed interval of time or space, assuming that these events occur with a known constant mean rate and independently of the time since the last event.