Which of the following is incorrect about the auditor's responsibility for
evaluating noncompliance by the entity to laws and regulations?
Noncompliance includes personal misconduct of the entity's management or
employees though they are unrelated to the entity's business activities.
Noncompliance includes transactions entered into by, or in the name of, the
entity, or on its behalf, by those charged with governance, management or
employees.
Detection of noncompliance, regardless of materiality, requires considerations
of the implications for the integrity of management or employees.
Noncompliance refers to acts of omission or commission by the entity being
audited which are contrary to prevailing laws and regulations.
Which of the following should the auditor likely to do when the application
of planned audit procedures indicates the possible existence of fraud or
error?
He should refer the suspected fraud or error to the internal auditor.
He should discuss the matter with the person whom he believes is involved with
the irregularities.
The auditor should resign in order to avoid legal responsibility.
He should consider the potential effect on the financial statements.
Auditing standards require that auditors be aware of relevant factors relating
to fraudulent financial reporting. Which of the following statements is false
concerning fraudulent reporting?
Fraud involves actions of management but excludes the actions of employees
or third parties.
An audit rarely involves the authentication of documentation; thus, fraud may
go undetected by the auditor.
Two types of fraud relevant to the auditor include material misstatements
arising from fraudulent financial reporting and material misstatements arising
from misappropriation of assets.
Fraud frequently involves a pressure or an incentive to commit fraud and a
perceived opportunity to do so.
Under which of the circumstances below would the auditor conclude that
withdrawal from the engagement is necessary?