An auditor learns that a client's employee in control of inventory gets divorced and is responsible for paying a large amount of child support. All of the following for the audit of inventory likely are true except:
A)fraud risk increases.
B)the risk of misappropriation of assets increases.
C)risk of material misstatement increases.
D)detection risk increases.

Question

Quizplus · Accepted Answer

The detection risk is not affected by this situation; it remains the same regardless of the employee's personal circumstances. However, the other options are all true: with financial stressors, employees may be more likely to commit fraud or misappropriate assets, increasing the overall risk of material misstatement in the inventory account.

An Auditor Learns That a Client's Employee in Control of Inventory