In Connection with the Audit of Financial Statements, an Independent

question 64

Multiple Choice

In connection with the audit of financial statements, an independent auditor could be responsible for failure to detect a material fraud if

• A) statistical sampling techniques were not used on the audit engagement.
• B) the auditor planned the audit in a negligent manner.
• C) accountants performing important parts of the work failed to discover a close relationship between the treasurer and the cashier.
• D) the fraud was perpetrated by one employee who circumvented the existing internal controls.

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Definitions:

Commercial General Liability Policy

A policy that generally provides protection for the insured for bodily injury, as well as for third parties for property injury.

Broad Range

Refers to an extensive variety or a wide spectrum of items, ideas, or options available.

Risks

The possibility of suffering harm, loss, or a negative outcome as a result of engaging in an activity or decision.

Moral Hazard

The increase in risk-taking behavior when an individual or entity is protected from the consequences, typically in an insurance or financial context.