Detection of Fraud Is Integral to the Audit Function

question 64

Multiple Choice

Detection of fraud is integral to the audit function.The best reason for this is that:

• A)unless auditors can provide assurance that the financial statements are free of material misstatements due to fraud,there is no justification for the audit function.
• B)the AICPA has mandated that the auditor take on more responsibility than previously required because of management's demand for fraud finding.
• C)it is the responsibility of the auditor to provide internal control over a client organization sufficient to discover or prevent fraud from occurring.
• D)auditor fraud is a large concern of shareholders and the audit committee must continually monitor the auditors to ensure they are not misstating financial statements.

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Definitions:

FIFO Method

An inventory valuation method that assumes the first items placed in inventory are the first sold, standing for "First In, First Out."

Cost Per Equivalent Unit

A measurement used in cost accounting to calculate the cost assigned to each unit produced, by considering the costs incurred at each stage of production.

Materials Used

The cost of raw materials and supplies that are consumed in the manufacturing process to produce goods.

First-In, First-Out Method

An inventory valuation method assuming that the first items purchased or produced are the first ones sold, affecting the cost of goods sold and inventory valuation.