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The auditor must test for fraud in the planning stage by sampling
accounts.
The auditor must consider the likelihood of fraud existing in the
company in the planning stage.
The auditor must realize that most people are honest and not
automatically assume that fraud exists when planning the audit.
The auditor must not be aggressive in its initial approach to fraud
as trust may be lost by the client.
49. Which of the following creates an opportunity for fraud to be
committed in an organization? (Points: 4)
Management demands financial success.
Poor internal control.
Commitments tied to debt covenants.
Management is aggressive in its application of accounting rules.
50. Sam Jones, controller of Mitnikco, spends three days researching
the accounting statements to find loopholes in the "rules" and to make
a case for recognizing revenue earlier, rather than in later years. In
the end, Sam and the other members of management determine that
they will reduce the company's deferred revenue accounts and begin
accounting for all revenues as agreements are signed. What are the
motivations of Mitnikco management based solely on the information
above? (Points: 4)
Pressures
Opportunity
Rationalization