The auditor is most likely to presume that a high risk of a fraud exists if
A) The entity is a multinational company that does business in numerous foreign countries.
B) The entity does business with several related parties.
C) Inadequate segregation of duties places an employee in a position to perpetrate and conceal theft.
D) Inadequate employee training results in lengthy EDP exception reports each month.

Question

Quizplus · Accepted Answer

Inadequate segregation of duties places an employee in a position to perpetrate and conceal theft is a known and recognized risk factor for fraud. This situation provides an opportunity for an employee to commit fraud and also to hide it by not being detected in a timely manner. Therefore, the auditor is most likely to presume the high risk of fraud when there is inadequate segregation of duties. The other options may also pose risks of fraud but do not have as strong of an association with increased risk as inadequate segregation of duties.

The Auditor Is Most Likely to Presume That a High