Final answer:
Factors that mitigate fraud risk should be evaluated by auditors to decrease the likelihood or impact of fraud. Analyzing risk and understanding investor considerations in financial markets aid in this process.
Step-by-step explanation:
After fraud risks are identified and documented, the auditor should evaluate factors that mitigate fraud risk before developing an appropriate response to the risk of fraud. Factors that mitigate risk are those that reduce the likelihood or potential impact of fraud. It's important for auditors to analyze the risk involved in different types of financial assets and to understand what considerations are important to investors in the financial market.
Some factors that can mitigate fraud risk include strong internal controls, capable and ethical management, and effective oversight by the board of directors or audit committee. By identifying these factors, auditors can tailor their audit plans to effectively address and lower the potential for fraud within an organization.