Final answer:
The audit team assesses the risk of fraud using factors such as pressure and opportunities for fraud, misappropriation of assets, unpredictability in audit procedures, and modification of planned audit procedures.
Step-by-step explanation:
The audit team assesses the risk of fraud by considering several factors. One of these factors is the pressure and opportunities for management to commit forgery. This includes looking at the financial incentives or personal circumstances that might drive management to engage in fraudulent activities.
Another factor is the misappropriation of assets. This involves examining any potential misuse or theft of company resources, such as cash, inventory, or intellectual property.
Additionally, the audit team may include elements of unpredictability in their procedures to detect and prevent fraud. This can include surprise audits, rotation of auditors, or random sampling methods to identify any irregularities or suspicious activities.
Lastly, the modification of planned audit procedures may be necessary to address specific fraud risks. For example, if there are concerns about fraudulent financial reporting, the audit team may increase their scrutiny of accounting records or implement additional testing procedures.