Chapter 2, Problem 26FF

a.

To determine

Introduction:The term fraud can be explained as a deliberate action of an individual or group of individuals involved in voluntarily presenting the deceptive financial statements of a company.

To identify:The situation where Company KC is trusting Person S for auditing their financial statements.

b.

To determine

To identify:The obligation of Company GT to uncover the threat.

c.

To determine

To identify:Thehow the Person S luxurious lifestyle raised suspicions for the regulatory authorities.

d.

To determine

To identify:That how the management and auditors could have been more professionally skeptical in the given scenario.

e.

To determine

To identify:The responsibility of audit committee.

f.

To determine

To identify:The internal controls that the Company KC should have employed.

g.

To determine

To identify:That how the management and auditors should have responded to the behavior of the Person S.