Question

ADVANCE AUDITING !

The audit manager gas indicated that you will be expected to ensure that the less experienced member of the Jefferson audit team understands the new fraud guidelines. While preparing for a discussion regarding these new guidelines you consider the following statement.

Please indicate whether each statement is TRUE OR FALSE.

	AN AUDITOR SHOULD CONDUCT THE AUDIT WITH PROFESSIONAL SKEPTICISM WHICH INCLUDES AN ATTITUDE THAT ASSUMES BALANCE ARE INCORRECT UNTIL VERIFIED BY THE AUDITOR BY GATHERIN EVIDENCE.
	THE FACT THAT A COMPANY NEEDS TO OBTAIN ADDITIONAL DEBT OR EQUITY NEEDS TO OBTAIN ADDITIONAL DEBT OR EQUITY FINANCING TO STAY COMPETITIVE MAY BE A FRAUD RISK FACTOR.
	PROFESSIONAL SKEPTICISM SHOULD BE EXERCISED THROUGHOUT THE AUDIT PROCESS
	THE THREE COMPONENTS OF THE FRAUD TRIANGLE ARE INCENTIVE, OPPORTU ITY, AND FRAUD RISK FACTOR.
	IF FRAUD IS DETECTED AND MISSTATEMENT DOES EXIST, AN AUDITOR ASSESSES IF IT IS MATERIAL. IF IT IS NOT MATERIAL, THE AUDITOR TELLS MANAGEMENT AND HAS NO OTHER RESPONSIBILITY
	IF A MATERIAL PROBLEM IS RESOLVED, IT IS NOT NECESSARY FOR THE AUDITOR TO INFORM THE AUDIT COMMITTEE.
	WHEN PERFORMING A FINANCIAL STATEMENT AUDIT, AUDITOR ARE REQUIRED TO EXPLICITLY ASSESS THE RISK OF MATERIAL MISSTATEMENT DUE TO FRAUD.

Answer 1

1. True [ An auditor is required to assume the balance as incorrect until he verifies is guided as per AU 420]

2. True [ Excessive pressure on the management to meet the requirements and expectations of third parties is a risk factor relating to misstaments]

3. True [ A material misstatement due to fraud could exist throughout the audit and the auditor must be thoroughly skeptical during its entire duration]

4. True

5. True [ If there is a misstatement, the auditor has to determine if it is material. If immaterial the auditor has to inform the management only]

6. False[ The auditor has to communicate the issue whether or not it has been resolved ]

7. True