Question

Which of the following is least likely to be included in an auditor's inquiry of management while obtaining information to identify the risks of material misstatement due to fraud?

A) Are financial reporting operations controlled by and limited to one location?
B) Does it have knowledge of fraud or suspect fraud?
C) Does it have programs to mitigate fraud risks?
D) Has it reported to the audit committee the nature of the company's internal control?

Answer 1

The least likely inquiry to be included in an auditor's assessment of fraud risks is whether financial reporting operations are controlled by and limited to one location, as this doesn't directly relate to fraud detection or prevention.

Step-by-step explanation:

The question pertains to the auditor's role in identifying the risks of material misstatement due to fraud during an audit. When an auditor inquires of management, they are seeking to understand the company's environment and controls to assess the risk of fraud. The option least likely to be included in an auditor's inquiry of management for this purpose would be (A) Are financial reporting operations controlled by and limited to one location? This question does not directly relate to fraud but rather to the concentration of control which can be a risk factor but is not indicative of the existence or mitigation of fraud risks. In contrast, options (B), (C), and (D) are directly related to the management's awareness and actions toward preventing and detecting fraud. Knowledge of fraud (B), having programs in place to mitigate fraud risks (C), and reporting on internal controls to the audit committee (D) are essential topics for auditors to explore when identifying the risks of material misstatement.