Question

An auditor’s response to the assessment of the risks of material misstatement due to fraud takes various forms. A response with an overall effect on the conduct of the audit is to
A.	Change the timing or extent of auditing procedures.
B.	Perform a retrospective review of significant accounting estimates.
C.	Consider whether management’s applications of accounting principles indicates a bias.
D.	Change the nature of auditing procedures.

Answer 1

The question requires us to find an auditor's response to assess the risk of material misstatement on account of possible fraud. Auditors ingeneral suspect management attitude when they get significant evidence that accounting principles are not applied in the best interest of the entity. Thus any bias in application of accounting policies and principles is indicative that there exists risk of material misstatements.

So Correct option should be ............... Option - C .... Consider whether management’s applications of accounting principles indicates a bias.