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 divorce and child support payment situation of the employee in control of inventory does not directly affect detection risk, as this is controlled by the auditor and is typically set at a low level. However, fraud risk, misappropriation of assets risk, and risk of material misstatement would all increase due to the potential financial pressure on the employee to manipulate inventory records.

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