In searching for breakdowns of internal controls by collusion and fraud, auditors:
A) should check all journal entries made on holidays, weekends, and late at night.
B) should discuss with employees any journal entry which has been made to reduce liabilities or increase owners' equity.
C) should verify all journal entries and values associated with consolidations which resulted for work within spreadsheets.
D) should obtain an understanding of the internal control processes regarding journal entries and other adjustments.

Question

Quizplus · Accepted Answer

Obtaining an understanding of the internal control processes regarding journal entries and other adjustments is the best choice because it allows the auditor to assess the effectiveness of the controls in place and identify any areas of weakness that may increase the risk of collusion or fraud. Checking journal entries made on holidays, weekends, and late at night (Option A) may be useful in detecting unusual activity, but it is not a foolproof method and may not be practical in all cases. Discussing specific journal entries with employees (Option B) may be helpful but is not a comprehensive approach, while verifying all journal entries and consolidations (Option C) may be too time-consuming and not cost-effective.

In Searching for Breakdowns of Internal Controls by Collusion and Fraud