Auditors Must Assess Fraud Risk on Every Audit and Respond

question 66

Multiple Choice

Auditors must assess fraud risk on every audit and respond to the risks that are identified.Which of the following is not a procedure required to further address the fraud risk of management override of internal control?

• A)Reviewing accounting estimates for biases.
• B)Examining physical controls over assets.
• C)Evaluating the business rationale for significant unusual transactions.
• D)Examining journal entries and other adjustments for evidence of fraud.

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Definitions:

Hedge

An investment made to reduce the risk of adverse price movements in an asset.

Speculative Forward Contract

A financial derivative used to speculate on the future price of an asset, involving an agreement to buy or sell the asset at a future date for a price determined today.

Fair Value Hedge

A risk management technique that uses financial instruments to mitigate the risk associated with changes in the fair value of an asset or liability.

Firm Commitment

An agreement between a buyer and an underwriter in which the underwriter guarantees the sale of a certain amount of securities.