During audit planning, an auditor obtained the following information:1. The company’s controller works very hard, including evenings and weekends, andhas not taken a vacation in two years.2. The company’s board of directors includes a majority of directors who are independent of management.3. Assets and revenues are based on significant estimates that involve subjective judgments and uncertainties that are hard to corroborate.4. The company is marginally able to meet exchange listing and debt covenant requirements.5. The company’s financial performance is threatened by a high degree of competitionand market saturation.6. New accounting pronouncements have resulted in explanatory paragraphs forconsistency for the company and other firms in the industry.7. The company has experienced low turnover in management and its internal auditfunction.8. Significant operations are located and conducted across international borders injurisdictions where differing business environments and cultures exist.9. There are recurring attempts by management to justify marginal or inappropriateaccounting on the basis of materiality.a. Indicate whether the information indicates an increased risk for fraud.b. If the information indicates an increased risk of fraud, indicate which fraud condition(incentives/pressures, opportunities, or attitudes/rationalization) is indicated
During audit planning, an auditor obtained the following information:
1. The company’s controller works very hard, including evenings and weekends, and
has not taken a vacation in two years.
2. The company’s board of directors includes a majority of directors who are independent of management.
3. Assets and revenues are based on significant estimates that involve subjective judgments and uncertainties that are hard to corroborate.
4. The company is marginally able to meet exchange listing and debt covenant requirements.
5. The company’s financial performance is threatened by a high degree of competition
and market saturation.
6. New accounting pronouncements have resulted in explanatory paragraphs for
consistency for the company and other firms in the industry.
7. The company has experienced low turnover in management and its internal audit
function.
8. Significant operations are located and conducted across international borders in
jurisdictions where differing business environments and cultures exist.
9. There are recurring attempts by management to justify marginal or inappropriate
accounting on the basis of materiality.
a. Indicate whether the information indicates an increased risk for fraud.
b. If the information indicates an increased risk of fraud, indicate which fraud condition
(incentives/pressures, opportunities, or attitudes/rationalization) is indicated
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
