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    Auditor issues with reporting fraudulent income statements

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    1. What are the major risks an auditor could encounter when planning an audit and how can this be avoided?
    2. What is the definition of a material misstatement and how can this lead to conflict between the auditor and the client?
    3. Is an auditor responsible for detecting fraud, or just making sure that the financial statements don't have material misstatements and conform to GAAP?
    4. What does an auditor test for in their procedures - and can these truly find fraud?
    5. What is the best audit opinion to have - qualified or unqualified or going concern?
    6. If you were on the audit committee, what do you really think you've learned from the auditors communication?
    7. If you're a shareholder, should you be comfortable that the "representatives" of the shareholders (Board of Directors) have ensured that the company's financial statements truly represent to results of the operations?

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    https://brainmass.com/business/auditing/auditor-issues-reporting-fraudulent-income-statements-613132

    Solution Preview

    1. What are the major risks an auditor could encounter when planning an audit and how can this be avoided?

    The major risks that auditors will encounter when planning an audit entails the risk that the auditor will not be able to provide absolute assurance regarding their opinion on potential misstatements detected within the financial reports. The second risk that is faced is the possibility that auditors will fail to appropriately modify their opinion in regard to financial statements wherein there has been material statements that are misstated. Other risks that are not traditionally defined include the potential risk of an auditor erroneously concluding that financial statements are materially misstated, which can be avoided by ensuring that the auditor adheres to the established guidelines and regulations set forth by accounting agencies.

    2. What is the definition of a material misstatement and how can this lead to conflict between the auditor and the client?

    The definition of misstatements entail errors on financial statement that may emanate from fraud wherein these errors may entail the following discrepancies, inaccuracy in gathering or processing data from which financial statements are prepared, differences that exist between the amount, classification, or presentation of a reported financial statement element, account, or item and the amount, classification, or presentation wherein under the generally ...

    Solution Summary

    Auditor issues with reporting fraudulent income statements are examined.

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