Auditors in Identifying and Assessing the Risks of Material Financial

question 67

Multiple Choice

Auditors in identifying and assessing the risks of material financial statement fraud should do all but which of the following?

• A) Make inquiries of the board of directors, senior executives, legal counsel, and others charged with government governance within the client organization to gather sufficient information about the risk of the fraud.
• B) Communicate with legal counsel about the allegations of fraud and how they are addressed.
• C) Consider all evidence gathered through analytical procedures that is considered unusual, unexpected, or even suspiciously normal based on the financial condition and results of the business.
• D) Consider evidence gathered only through the audit of internal control of financial reporting that may suggest the existence of one or more fraud risk factors, and that adequate and effective internal controls did not address and account for the detected risk.

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Definitions:

Estimated Future Returns

Projections or forecasts of the financial returns a company expects to receive from investments, assets, or business activities in the future.

End-Of-Period Accrual

Accounting adjustments made at the end of accounting periods to record revenues earned and expenses incurred but not yet recorded.

Sales Returns

Transactions where customers return previously purchased merchandise, leading to the reversal of revenue and reduction in sales figures.

Gross Accounts Receivable

The total amount owed to a company by its customers before deducting any allowance for doubtful accounts.