Final answer:
An auditor could have been alerted to the misstatement in the entity's financial statements by examining the journal entries, which could show unusual patterns and illogical combinations of accounts, indicative of potential fraud.
Step-by-step explanation:
The auditor could most likely have been alerted to this fraud by examining the journal entries for unusual patterns, such as debits and credits to an illogical combination of accounts. Auditors are trained to look for red flags that could indicate fraudulent activity, including entries that do not seem to make sense or that do not follow generally accepted accounting principles. For instance, revenues should not typically be directly linked with accounts that are not related to sales or income, and such irregularities can be a sign of an attempt to inflate revenue figures.
In the example provided, proactive measures like Noel's attentive examination of bills can stop potential fraud or errors by catching them before they cause significant harm. Likewise, other stakeholders in the financial reporting process, such as co-authors in academic research with regards to Stapel's fraud, should also be vigilant and familiar with the data they are working with to detect possible inconsistencies. Moreover, similar to how some governments have used accounting maneuvers to hide debt, entities may use deceptive journal entries to disguise the true state of their finances.
Finally, it's important to consider that with decreased resources devoted to auditing activities, as seen in the decline in tax audit frequency in the United States, the responsibility for detecting and preventing fraud may increasingly fall on internal controls and the due diligence of employees within companies and institutions.