When Auditing for Fraud the Auditors Should Do All of the Following

question 28

Multiple Choice

When auditing for fraud the auditors should do all of the following except:

• A) consider any unusual or unexpected relationships that have been identified in performing analytical procedures.
• B) conduct a brainstorming session to discuss the risk of fraud.
• C) only investigate areas where all three fraud risk factors are present.
• D) examine journal entries and other adjustments for evidence of possible material fraud.

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Definitions:

Golden Parachutes

Large financial compensation packages provided to executives upon termination, usually in the context of a merger or takeover.

Horizon Value

The estimated value of a company or project at the end of a specific period, taking into account its future income potential.

Incremental Free Cash Flows

The additional cash flow a project generates for a company, calculated after accounting for the project's direct costs.

Conglomerate Mergers

Mergers between firms that operate in unrelated business activities, aiming for diversification and risk reduction.