Which of the Following Circumstances Would Most Likely Cause an Auditor

question 620

Multiple Choice

Which of the following circumstances would most likely cause an auditor to suspect that material misstatements arising from fraud exist in a client's financial statements?

• A) Property and equipment are usually sold at a loss before being fully depreciated.
• B) Significantly fewer responses to confirmation requests are received than expected.
• C) Monthly bank reconciliations usually include several in-transit items.
• D) Clerical errors are listed on an EDP-generated exception report.

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Definitions:

Target Costing

A pricing method in which market prices determine the cost constraints for product development, aiming to ensure competitiveness and profitability.

Appraisal Costs

Expenses related to the testing and inspection of products to ensure they meet quality standards.

Defects

Imperfections or faults in a product that detract from the product's value or functionality.

Services

Intangible products that provide value or fulfill the needs of customers, such as consulting, maintenance, or education.