The Audit Team Has Identified and Documented Fraud Risk

question 1

Multiple Choice

The audit team has identified and documented fraud risk. Their next step should be to:

• A) evaluate factors that should reduce risk.
• B) develop programs to test for fraud.
• C) proceed with performing tests of controls.
• D) proceed with performing substantive tests of balances.

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Definitions:

Discrete Probability

The mathematical study of probability where the outcome is determined from a set of distinct, separate values.

Queuing Theory

A body of knowledge about waiting lines.

Little's Law

A principle in queuing theory stating that the long-term average number of customers in a stable system L is equal to the long-term average effective arrival rate, λ, multiplied by the average time a customer spends in the system, W (L = λW).

Poisson Distribution

The Poisson Distribution is a statistical distribution that expresses the probability of a given number of events occurring in a fixed interval of time or space if these events occur with a known constant mean rate and independently of the time since the last event.