Which of the following circumstances would most likely cause an auditor to suspect that material misstatements arising from fraud exist in a client's financial statements?

Question

Quizplus · Accepted Answer

Choice "B" is correct. Material fraud ("intentional" misstatements or omissions) may result from large amounts of fictitious accounts receivable. Receiving significantly fewer confirmation responses than expected implies some accounts receivable may be fictitious. Choice "A" is incorrect. Selling property and equipment at a loss from book value is not unusual and would not necessarily be indicative of fraud. Choice "C" is incorrect. Bank reconciliations typically include in-transit items (e.g., deposits in transit and outstanding checks), and this would not necessarily be indicative of fraud. Choice "D" is incorrect. Clerical errors listed on an exception report would be a control over data processing that would tend to minimize the risk of material misstatement.

Which of the Following Circumstances Would Most Likely Cause an Auditor