In Planning the Audit,members of the Audit Team Are Required

question 4

Multiple Choice

In planning the audit,members of the audit team are required to have a team meeting to discuss the potential for misstatement due to fraud in the inventory process,including

• A)the pressure on management to commit fraud
• B)the inevitability that fraud will be perpetuated in the company
• C)the general tone or environment in the company that may allow management to conceptualize committing fraud
• D)the general tone or environment in the company that may allow management to rationalize committing fraud
• E)the rationalization for fraud to be perpetrated in the company
• F)both A and D
• G)both C and E

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Definitions:

Insolvent Company

A company that is unable to pay its debts as they come due, or whose liabilities exceed its assets in value.

Unsecured Liabilities

Debts or obligations that do not have specific assets pledged as collateral in case of default.

Federal Income Taxes

Taxes levied by the national government on annual income earned by individuals, corporations, trusts, and other legal entities.

Bankruptcy

A legal proceeding involving a person or business that is unable to repay outstanding debts.