An Auditor Has Identified a Risk of Material Misstatement Due

question 172

Multiple Choice

An auditor has identified a risk of material misstatement due to fraud related to the inventory function. Which is least likely to be an appropriate response?

• A) Observing inventory counts on an unannounced basis.
• B) Requesting that management more closely monitor the inventory function.
• C) Assigning more experienced personnel to the engagement.
• D) Requesting that inventory be counted on a date close to the end of the reporting period.

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Definitions:

Prepaid Insurance

An asset account on the balance sheet representing insurance payments made in advance for future coverage periods.

Adjusting Entry

An accounting record made at the end of an accounting period to allocate income and expenditure to the appropriate period.

Weekly Wages

The total amount of earnings paid to an employee or group of employees on a weekly basis.

Factory Personnel

Workers or employees involved in the production processes within a manufacturing facility or plant.