AUD 3

Question 1

Which of the following is the most important concerning an auditor’s responsibility to detect errors of fraud?

1. The probability that unreasonable accounting estimates results in unintentional bias or intentional attempts to misstate the financial statements
2. The susceptibility of the accounting records to intentional manipulations, alterations or misapplication of accounting principles
3. the possibility that management fraud, defalcations, and the misappropriation of assets may indicate the existence of acts of noncompliance with laws and regulations
4. The risk that mistakes, falsifications, and omissions may cause the financial statements to contain material misstatements

Answer 1

Choice “4” is correct. The most important factor concerning an auditor’s responsibility to detect errors and fraud is the risk that mistakes, falsifications, and omissions may cause the financial statements to contain material misstatements.
Choice “1” is incorrect. The probability that unreasonable accounting estimates result from unintentional bias or intentional attempts to misstate the financial statements is something the auditor must consider, but it does not describe the auditor’s responsibility to detect errors and fraud.
Choice “2” is incorrect. The susceptibility of the accounting records to intentional manipulations, alterations, and the misapplication of accounting principles is something the auditor must consider, but it does not describe the auditor’s responsibility to detect errors and fraud.
Choice “3” is incorrect. The possibility that management fraud, defalcations, and the misappropriation of assets may indicate the existence of acts of noncompliance with laws and regulations is something the auditor must consider, but it does not describe the auditor’s responsibility to detect errors and fraud.