Which of the following characteristics most likely would heighten an auditor's concern about the risk of material misstatement arising from fraudulent financial reporting?

Question

Quizplus · Accepted Answer

Choice "C" is correct. Frequent disputes between management and the auditor is a fraud risk factor that would heighten an auditor's concern about the risk of material misstatement arising from fraudulent financial reporting. Choice "A" is incorrect. Management's excessive interest in maintaining or increasing the stock price and earnings trend is a fraud risk factor, but management's lack of interest in maintaining an earnings trend would not constitute a fraud risk factor. Choice "B" is incorrect. Since depreciation does not adjust an asset to market value, the sale of computer hardware at a loss before being fully depreciated is not unusual and would not heighten an auditor's concern. Choice "D" is incorrect. Bank reconciliations with outstanding checks are not unusual and would not heighten the auditor's concern about the risk of material misstatement. Outstanding checks can also be verified with the bank at a later date, when the checks clear.

Which of the Following Characteristics Most Likely Would Heighten an Auditor's