Which of the following circumstances most likely would cause an auditor to suspect that there are material misstatements in an entity's financial statements?

Question

Quizplus · Accepted Answer

Choice "B" is correct. Missing or unavailable documents or electronic evidence may be indicative of an intentional material misstatement in the entity's financial statements (fraud). Choice "A" is incorrect. Senior financial management should participate in the selection of accounting principles and the determination of significant estimates. This would not be indicative of material misstatements in the entity's financial statements. Choice "C" is incorrect. The auditor would need to audit related party transactions to ensure that there is proper financial statement disclosure, but the existence of such transactions would not be indicative of material misstatements in the entity's financial statements. Choice "D" is incorrect. The fact that senior management wants to upgrade the entity's information technology capabilities would not be indicative of material misstatements in the entity's financial statements.

Which of the Following Circumstances Most Likely Would Cause an Auditor