Which of the following circumstances most likely would cause an auditor to consider whether material misstatements exist in an entity's financial statements?

Question

Quizplus · Accepted Answer

Choice "D" is correct. Vouching recorded transactions to supporting documentation provides support for the occurrence assertion. The lack of supporting documentation calls into question the occurrence of the transactions under examination. Choice "A" is incorrect. Little emphasis on meeting earnings projections would be considered a positive factor in preventing material misstatements from occurring. Choice "B" is incorrect. As the representatives of shareholder interests, an active board of directors is considered a positive control. Choice "C" is incorrect. The existence of significant deficiencies in internal control may represent a conscious decision by management to accept that degree of risk because of cost or other considerations. Therefore, although failure to correct such deficiencies is considered a fraud risk factor, the auditor is more likely to be concerned about transactions that are not supported by proper documentation.

Which of the Following Circumstances Most Likely Would Cause an Auditor