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auditors liability

Based on my textbook, I can not find concrete information to support questions. For me cash cycle would be most important. Auditors should not be liable, comparing the outputs against documents and inputs can identify frauds, and testing the internal controls provides opportunities to establish the validity of the processes/procedures.

What can you share? Thanks,

(1) Which cycle do you consider to be the most important to test? Why?
(2) If some frauds are deemed common, should auditors be held liable if they do not find a common fraud? Why or why not?
(3) What is the best way to identify high fraud risk areas? Why?
(4) Which are more important, tests of controls or substantive tests? Why?

Solution Preview

Your viewpoints (background info) on general questions.

Based on my textbook, I can not find concrete information to support questions. For me cash cycle would be most important. Auditors should not be liable, comparing the outputs against documents and inputs can identify frauds, and testing the internal controls provides opportunities to establish the validity of the processes/procedures.

What can you share? Thanks,

(1) Which cycle do you consider to be the most important to test? Why?
I consider the cash conversion cycle to be the most important to test. This is because most frauds take place in the cash conversion cycle. Inevitably, the cash cycle if affected if there are large unpaid expenses, also if there are any bogus revenues these will affect the cash cycle and if there are buying liabilities there will be some reflection in the cash cycle. In ...

Solution Summary

Auditor's liability is discussed very comprehensively in this explanation.

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