Indicate Whether You Agree or Disagree with the Following Statements

question 47

Essay

Indicate whether you agree or disagree with the following statements and explain your reasoning.
a) Related party transactions require proper identification and consideration when considering risk. However, there is no requirement to disclose related party transactions unless they have an impact on material misstatements.
b) When assessing fraud risk, auditors should adopt an attitude of professional scepticism to ensure that any indicator of a potential fraud is properly investigated.
c) The responsibility for preventing and detecting fraud rests with those charged with governance at the client as well as the auditors.
d) The auditor should not ask management and those charged with governance if they are aware of a known fraud or suspect there has been fraud.
e) Elvie Lee explained to her friend how application controls work: "Application controls are designed to prevent and detect a material misstatement in the financial statements."

---

Definitions:

Dividends

Payments made to shareholders out of a company's profits, usually on a quarterly basis, representing a portion of the company’s earnings distributed to its stockholders.

Cash

Cash refers to money in the physical form of currency, such as banknotes and coins, which represents immediate value for transactions or reserves.

Stock

Financial instruments representing ownership in a company and a claim on a portion of its assets and earnings.

Accumulated Earnings

The total net income of a company retained within the business after dividends are paid, without distribution to shareholders.