What Should an Audit Team Do When It Discovers That

question 54

Multiple Choice

What should an audit team do when it discovers that fraud risk factors are present on an audit engagement?

• A)Withdraw from the engagement and inform regulatory bodies.
• B)Modify procedures to actively search for the existence of fraud.
• C)Reduce the amount of evidence required and resort to management inquiry.
• D)Turn the audit over to forensic accountants.

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Definitions:

Profit-Maximizing Level

The point at which a firm achieves its highest profit, determined by the level of output where marginal cost equals marginal revenue.

Market Price

The actual selling price of a good or service in the marketplace at which buyers and sellers conduct transactions.

Total Revenue

The total income a firm receives from the sales of its products or services before any expenses are subtracted.

Economic Profit

The difference between a firm's total revenue and its opportunity costs, including both explicit and implicit costs.