Auditing standards specifically require auditors to identify ________ as a fraud risk in most audits.
A) overstated assets
B) understated liabilities
C) revenue recognition
D) overstated expenses

Question

Quizplus · Accepted Answer

Auditing standards require auditors to identify revenue recognition as a fraud risk in most audits. This is because revenue is a significant financial statement item that can be manipulated by management to achieve their desired financial results. The risk of fraud increases when there is pressure on management to meet financial targets or when there is an opportunity to manipulate revenue recognition policies. Therefore, auditors are required to obtain sufficient evidence to assess the effectiveness of the client's internal control over revenue recognition, and to test the appropriateness of revenue recorded in the financial statements.

Auditing Standards Specifically Require Auditors to Identify ________ as a Fraud