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Suppose the U.S. president is attempting to decide whether the federal government should spend more on research to find a cure for heart disease. He asks you, one of his economic advisors, to prepare a report discussing the relevant factors he should consider. Use the concepts of opportunity cost and trade-offs to discuss some of the main issues you would deal with in your report.
The following questions concern the auditor’s responses to the possibility of fraud.
a. When fraud risk factors are identified during an audit, the auditor’s documentation should include
b. If an independent audit leading to an opinion on financial statements causes the auditor to believe that a material misstatement due to fraud exists, the auditor should first
(1) request that management investigate to determine whether fraud has actually occurred.
(2) make the investigation necessary to determine whether fraud has actually occurred.
(3) consider the implications for other aspects of the audit and discuss the matter with the appropriate levels of management.
(4) consider whether fraud was the result of a failure by employees to comply with existing controls.
c. Which of the following is least likely to suggest to an auditor that the client’s management may have overridden internal control?
(1) There are numerous delays in preparing timely internal financial reports.
(2) Management does not correct internal control weaknesses that it knows about.
(3) Differences are always disclosed on a computer exception report.
(4) There have been two new controllers this year.