Auditors should plan and perform their audits to provide reasonable assurance of detecting material misstatements in financial statements, including those resulting from fraud.
Required:
a. Distinguish between fraudulent financial reporting and misappropriation of assets.
b. Describe the three fundamental conditions necessary for the commission of fraud. Provide an illustration of these three conditions for a case of fraudulent financial reporting.
c. Describe the three ways in which the auditors may respond to fraud risks in an audit.
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