When considering the risk of misstatement due to fraud,
A) the risk of not detecting a material misstatement due to fraud is lower than the risk of not detecting a misstatement due to error.
B) the risk is only made at the financial statement level.
C) auditing standards require the auditor to presume that risk of fraud exists in expense transactions.
D) auditing standards outline procedures the auditor should perform to obtain information from management about their consideration of fraud.

Question

Quizplus · Accepted Answer

Auditing standards outline procedures that the auditor should perform to obtain information from management about their consideration of fraud. This includes asking management about their knowledge of fraud or suspected fraud within the entity, assessing the risks of fraud, and inquiring about the internal control policies and procedures in place to prevent and detect fraud. The risk of misstatement due to fraud is also not necessarily lower than the risk of misstatement due to error. Auditors are required to consider both types of risk in their audit and take appropriate measures to address them. Additionally, the risk of fraud can exist in any level of the financial statements, not just in expense transactions.

When Considering the Risk of Misstatement Due to Fraud