When Assessing Fraud Risk

question 121

Multiple Choice

When assessing fraud risk,

• A) fraud risk is assessed only at the overall financial statement level.
• B) the auditor's assessment of fraud risk should be ongoing throughout the audit.
• C) if the auditor concludes that there is a risk of material misstatement due to fraud, auditing standards require that the risks be treated as pervasive.
• D) auditing standards require that the auditor presume there is a risk of fraud in the inventory account.

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Definitions:

Paired-difference Experiment

An experimental design where the observations are made in pairs, and the analysis is based on the differences within each pair.

Rejection Region

The range of values for which the null hypothesis is not considered likely and is rejected in a statistical test.

Nonparametric Tests

Statistical tests that do not assume the data come from a particular distribution, often used when dealing with ordinal data or when the normality assumption is violated.

Parametric Tests

Statistical tests based on assumptions about the population distribution from which the sample is drawn, typically involving parameters like mean and standard deviation.