Special HW 4

1.    Distinguish between fraud and error.  What is the auditor's responsibility for finding each?

2.    Distinguish between fraudulent financial reporting and misappropriation of assets.

3.    List 2 major characteristics that are useful in predicting the likelihood of fraudulent financial reporting in an audit.

4.    What are the 3 conditions of fraud often referred to as the "fraud triangle?"

5.    What should the audit team consider in its planning discussion about fraud risks?

6.    Discuss the importance of the control environment, or "setting the tone at the top," in establishing a culture of honesty and integrity in a company.

7.    You go through the drive through window of a fast food restaurant and notice a sign that reads, "your meal is free if we fail to give you a receipt."  Why would the restaurant post this sign?

8.    You have identified a suspected fraud involving the company's controller.  What must you do in response to this discovery?  How might this discovery affect your report on internal control when auditing a public company?