During audit planning, an auditor obtained the following information: 1. The company’s financial stability or profitability is threatened by economic, industrial, or its operating conditions. 2. There is excessive pressure on management to meet debt repayment requirements. 3. The company’s board of directors’ personal net worth is materially threatened by its financial performance. 4. Important accounting estimates involve subjective judgments or uncertainties that are difficult to verify. 5. The audit committee overlooks certain aspects of financial reporting. 6. The company experiences high turnover in its information technology staff and internal audit function. 7. There is ineffective communication and therefore insufficient support of the company’s values. 8. There have been several incidents of violations of security laws and other regulations in the past. 9. The management makes unrealistic or overly optimistic forecasts to analysts, creditors, and other third parties. Required: 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
9-18. During audit planning, an auditor obtained the following information:
1. The company’s financial stability or profitability is threatened by economic, industrial, or its operating conditions.
2. There is excessive pressure on management to meet debt repayment requirements.
3. The company’s board of directors’ personal net worth is materially threatened by its financial performance.
4. Important accounting estimates involve subjective judgments or uncertainties that are difficult to verify.
5. The audit committee overlooks certain aspects of financial reporting.
6. The company experiences high turnover in its information technology staff and internal audit function.
7. There is ineffective communication and therefore insufficient support of the company’s values.
8. There have been several incidents of violations of security laws and other regulations in the past.
9. The management makes unrealistic or overly optimistic
Required:
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
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