Indicate whether the information indicates an increased risk for fraud. 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: Management has a strong interest in employing inappropriate means to minimize reported earnings for tax-motivated reasons. The company’s board of directors includes a majority of directors who are independent of management. Assets and revenues are based on significant estimates that involve subjective judgments and uncertainties that are hard to corroborate. The company is marginally able to meet exchange listing and debt covenant requirements. New accounting pronouncements have resulted in explanatory paragraphs for consistency for the company and other firms in the industry.
Indicate whether the information indicates an increased risk for fraud. 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: Management has a strong interest in employing inappropriate means to minimize reported earnings for tax-motivated reasons. The company’s board of directors includes a majority of directors who are independent of management. Assets and revenues are based on significant estimates that involve subjective judgments and uncertainties that are hard to corroborate. The company is marginally able to meet exchange listing and debt covenant requirements. New accounting pronouncements have resulted in explanatory paragraphs for consistency for the company and other firms in the industry.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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- Indicate whether the information indicates an increased risk for fraud.
- 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:
- Management has a strong interest in employing inappropriate means to minimize reported earnings for tax-motivated reasons.
- The company’s board of directors includes a majority of directors who are independent of management.
- Assets and revenues are based on significant estimates that involve subjective judgments and uncertainties that are hard to corroborate.
- The company is marginally able to meet exchange listing and debt covenant requirements.
- New accounting pronouncements have resulted in explanatory paragraphs for consistency for the company and other firms in the industry.
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