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Submitted By imbawjeeh
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4-20 a. Assessing management integrity should be considered before accepting the audit engagement. Some considerations are: * check references from other professionals * does the client deal ethically with outside parties

b. If during the assessment of management it is suspected that integrity is lacking the auditor would not put much reliance on management’s assertions but would increase the amount of evidence and collect more from external sources.

c. The normal responsibility is to carry out the audit with professional skepticism. It is not the auditor’s job to find criminal activity. The auditor will carry out procedures necessary to support his work and at the same time if anything comes to his attention that needs further investigation, will pursue it to its conclusion.

d. When management or directors are involved in criminal activity, their credibility is minimal at best. This indicates a larger risk of material misstatement of the financial statements. Where there is evidence of criminal activity, the auditor should consult a lawyer and consider resigning from the audit engagement.

e. If it were found that a prudent person (other auditors) would have gathered more evidence that would have led to the discovery of the fictitious sales, then it would be considered negligence.

10-24 Risk of error or fraud | Potential control (type of control) | Inaccurate data could be entered for a sale, resulting in incorrect or unauthorized prices or quantities. | - automated comparison of shoe code number to number in master file to see if it is on file(application control)- retrieval of price for that shoe code from price in master file (application control)- reasonableness check on quantity (e.g. requiring re-entry if greater than 1) (application control)- display back of data entered for visual check/warning message if there is an error

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