An Auditor Learns That a Client's Employee in Control of Inventory

question 23

Multiple Choice

An auditor learns that a client's employee in control of inventory gets divorced and is responsible for paying a large amount of child support. All of the following for the audit of inventory likely are true except:

• A)fraud risk increases.
• B)the risk of misappropriation of assets increases.
• C)risk of material misstatement increases.
• D)detection risk increases.

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Definitions:

Balance Sheet

A balance sheet is a financial statement that showcases an organization's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of its financial condition.

U.S. Dollars

The official currency of the United States, widely used as a benchmark and standard for international financial transactions.

Translation Adjustment

An accounting entry that arises when converting financial statements of foreign subsidiaries into the parent company's reporting currency, affecting comprehensive income.

Functional Currency

The currency of the primary economic environment in which an entity operates, generally the currency in which it primarily generates and expends cash.