When Auditing Financial Statements and Finding Indications of a Possible

question 33

Multiple Choice

When auditing financial statements and finding indications of a possible misappropriation of assets,independent auditors should

• A) investigate fully to determine the total amount of the misappropriation.
• B) determine which accounts are affected and the amount by which they are overstated or understated.
• C) determine the methods by which the misappropriation was carried out.
• D) identify a person(s) who are likely responsible for the misappropriation and obtain evidence about some other fraud indications in their work.
• E) all of these.

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Definitions:

Random Walk Theory

The hypothesis that stock market prices evolve according to a random walk and, thus, the future movement of stock prices cannot be predicted.

Stock Prices

The cost at which shares of companies are bought and sold in the stock market, reflecting the market's valuation of these companies.

Forecast Accurately

The process of predicting future events, values, or trends with a high degree of precision.

Unexpected Factors

External or unforeseen elements that can impact outcomes in various contexts, including economic conditions, natural disasters, or social changes.