Question

Under GAAS, which of the following is NOT required as part of the auditor’s effort to...

Under GAAS, which of the following is NOT required as part of the auditor’s effort to assess the risk of fraud on audits?

a asking management if they are aware of any fraud.

b Having a meeting among the audit team to brainstorm how fraud might be occurring

c considering the risk of payroll fraud

d considering the risk of fraudulent revenue recognition

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Answer #1

As per GAAS, the auditor shall ask management if they are aware and have a basic understanding of the fraud. fraud risks and steps they have taken to mitigate risk. Further, the auditor discusses with the team about the occurrence of fraud and the methods to recognize if any. The auditor also has to understand policies and procedures regarding revenue recognition. The auditor shall presume improper revenue recognition and always identify risks of management override of controls as a fraud risk. However the risk assessment does not presume payroll fraud.

Hence, the correct option is c. considering the risk of payroll fraud

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