When Auditing Financial Statements and Finding Indications of a Possible

question 2

Multiple Choice

When auditing financial statements and finding indications of a possible misappropriation of assets, independent auditors should:

• A)investigate fully to determine the total amount of the misappropriation.
• B)determine which accounts are affected and the amount by which they are overstated or understated.
• C)determine the methods by which the misappropriation was carried out.
• D)identify a person(s)who are likely responsible for the misappropriation and obtain evidence about some other fraud indications in their work.
• E)all of the these choices are correct.

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Definitions:

Freight-In

The cost associated with transporting goods into a place of business, usually considered part of the inventory cost.

Credit Sales

Transactions where goods or services are sold by a business and payment is received at a later date.

List Prices

List prices refer to the advertised or official price of a product before any discounts or reductions are applied.

Trade Discounts

Discounts from the list prices in published catalogs or special discounts offered to certain classes of buyers.