Which of the following does not represent an increased opportunity to commit fraud?
A)Related party transactions
B)The company founder is the CEO and Chairman of the Board.
C)The financial statements involve accounting estimates.
D)The company is a new audit client for the CPA firm.

Question

Quizplus · Accepted Answer

A new audit client does not represent an increased opportunity to commit fraud as the auditor will be starting with a clean slate and have no previous biases or assumptions about the company. In fact, the initial year of auditing a new client may involve increased scrutiny and testing due to lack of familiarity with the company's controls and processes. In contrast, related party transactions, the concentration of power in a single individual, and accounting estimates can all be red flags for fraud risk.

Which of the Following Does Not Represent an Increased Opportunity