An Auditor Discovers a Likely Fraud During an Audit but Concludes

question 15

Multiple Choice

An auditor discovers a likely fraud during an audit but concludes that the overall effect of the fraud is not sufficiently material to affect the audit opinion.The auditor should probably

• A) Disclose the fraud to the appropriate level of the client's management.
• B) Disclose the fraud to appropriate authorities external to the client.
• C) Discuss with the client the additional audit procedures that will be needed to identify the exact amount of the fraud.
• D) Modify the audit program to include tests specifically designed to identify the fraud and its impact on the financial statements.

Appreciate the role of sanctions, laws, and informal means of controlling and maintaining social order.

Understand the concept of legitimacy in leadership and governance across different political systems.

Analyze the transition processes from one form of political organization to another and the influence of external pressures on these transitions.

Understand the commonality and variations of equity offerings across industrialized nations.

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Definitions:

Explicit Costs

Direct, out-of-pocket payments for wages, rent, materials, and other inputs required for the production of goods or services.

Implicit Costs

The opportunity costs of utilizing resources owned by the firm that could have been employed elsewhere, not directly paid out in cash.

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, leading to a decreased cost per unit.

Pin Factory

An example used by Adam Smith to describe the benefits of specialization and division of labor in manufacturing, increasing productivity and efficiency.