Which of the following is a true statement about an auditor's responsibility regarding consideration of fraud in a financial statement audit?< 1.3 The auditor should consider the client's internal control and plan and perform the audit to provide absolute assurance of detecting all material misstatementsauditor should assess the risk that errors may cause the financial statements to contain any misstatements and determine whether the necessary controls are prescribed and are being followed satisfactorily The auditor should consider the types of misstatements that could occur and perform tests on 100% of the information subject to misstatements The auditor should assess the risks of material misstatements due to fraud
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Auditors are required to assess the risk of material misstatements in financial statements, including those due to fraud. Show more…
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During the audit of Glazier LLC, a distributor of glass products throughout the continental United States, it has been determined by the auditor, Locktight CPAs, that the client's system of internal control is not as robust as had been initially thought. As a result of this finding, which of the following strategies is most likely? The auditor will assess risk of material misstatement as high and adopt a reliance approach, whereby the auditor will perform increased substantive testing, including tests of details. The auditor will advise the internal control function to begin remedying defective internal controls, and will return to the audit once these controls have been corrected. The auditor will assess the client's controls as defective, increase the risk of material misstatement and substantive tests, and decrease audit risk. The auditor is likely to assess the risk of material misstatement as high, and rely less on the client's controls. As a result, the auditor will increase substantive testing to compensate for this.
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ISA 315 Identifying and assessing the risks of material misstatement requires the auditor to carry out risk assessment procedures to identify the possibility of material misstatement in the financial statements. Required: List three activities that the auditor can perform to help gain an understanding of the entity being audited and so identify the possibility of material misstatements.
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Recommended Textbooks
Horngren’s Cost Accounting
Cost Accounting A Managerial Emphasis
Principles of Accounting Volume 1: Financial Accounting
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