This problem requires you to access PCAOB Auditing Standards (pcaobus.org) to answer each of the following questions. You can access those standards by viewing content found under the link "Standards." For each answer, document the paragraph(s) in the relevant standard supporting your answer. Review PCAOB auditing standards related to the auditor's consideration of fraud in a financial statement audit, to answer questions in parts a. through d. Review PCAOB Auditing Standard No. 12, Identifying and Assessing Risks of Material Misstatement, to answer parts e. and f.
Required
a. You have determined that there is a fraud risk related to the existence and accuracy of inventory. Review the guidance in PCAOB auditing standards to provide examples of auditor responses involving changes to the nature, timing, and extent of audit procedures related to this assessed fraud risk for inventory.
b. What do PCAOB auditing standards say about how the auditor should assess risk related to revenue recognition?
c. What examples of auditor responses to fraud risk related to revenue recognition are provided in PCAOB auditing standards?
d. What kind of documentation is required for the auditor's consideration of fraud?
e. What kinds of inquiries about fraud risks are required by PCAOB Standard No. 12?
f. How does PCAOB Standard No. 12 define "fraud risk factors"? Do all conditions have to be present for fraud risk to exist?