Reference no: EM132060459

Question -

Auditing standards review. Management fraud (fraudulent financial reporting) is not the expected norm, but it happens from time to time. In the United States, several cases have been widely publicized. They happen when motives and opportunities overwhelm managerial integrity.

1. What distinguishes management fraud from a defalcation?

2. What are an auditor's responsibilities under auditing standards to detect management fraud?

3. What are some characteristics of management fraud that an audit team should consider to fulfill the responsibilities under auditing standards?

4. What factors might an audit team notice that should heighten the concern about the existence of management fraud?

5. Under what circumstances might an audit team have a duty to disclose management's fraud to parties other than the company's management and its board of directors?

Internal Control Audit Standards. Auditors are required to obtain a sufficient understanding of each component of a client's internal control. This understanding is used to assess control risk and plan the audit of the client's financial statements.

1. For what purposes should an auditors' understanding of the internal control components be used in planning an audit?

2. What is required for an audit team to assess control risk below the maximum level?

3. What should an audit team consider when seeking to reduce the planned assessed level of control risk below the maximum?

4. What are the documentation requirements concerning a client's internal control components and the assessed level of control risk?