Final answer:
A properly planned and performed audit may fail to detect a material misstatement resulting from fraud for multiple reasons, including the ineffectiveness of audit procedures for fraud concealed through collusion, the focus on detecting errors rather than fraud, the assessment of low risk of fraud based on control risk, and the failure to consider factors influencing audit risk for account balances with pervasive effects.
Step-by-step explanation:
A properly planned and performed audit may fail to detect a material misstatement resulting from fraud for multiple reasons:
- Audit procedures that are otherwise effective may be ineffective for fraud that is concealed through collusion. In this case, the auditor may not have access to the necessary information or evidence to uncover the fraud.
- An audit is planned and performed to provide reasonable assurance of detecting material misstatements caused by errors but not by fraud. This means that while the audit may identify errors in the financial statements, it may not be specifically designed to detect intentional misstatements resulting from fraud.
- The factors considered in assessing control risk indicated an increased risk of error but only a low risk of fraud in the financial statements. The auditor's assessment of control risk may concentrate more on identifying risks related to errors rather than fraud, which may result in a failure to detect material misstatements resulting from fraud.
- The auditor did not consider factors influencing audit risk for account balances that have effects pervasive to the financial statements taken as a whole. If the auditor fails to consider the risks associated with specific account balances or transactions that could have a significant impact on the overall financial statements, material misstatements resulting from fraud may go undetected.