Scenario: During the audit of a nonissuer, the auditor identifies a fraud risk related to management override of controls. To address this risk, the auditor plans to test journal entries.<br/><br/>Which of the following characteristics would MOST likely lead the auditor to select a specific journal entry for testing?

Answer options:

The entry is a recurring monthly depreciation adjustment calculated by the fixed asset module.

The entry was posted on a weekend by a user who does not normally make journal entries, and it has a round-number value.

The entry is supported by a purchase order, receiving report, and vendor invoice matching the amount.

The entry relates to the recording of payroll expense consistent with the prior pay period.

How to approach this question

Think like a forensic accountant. What looks suspicious? Unusual timing, unusual people, round numbers, entries made at the end of the period.

Full Answer

B.The entry was posted on a weekend by a user who does not normally make journal entries, and it has a round-number value.✓ Correct

AU-C 240 advises auditors to look for characteristics of fraudulent entries, such as: made to unrelated/unusual accounts, made by individuals who don't typically make entries, recorded at the end of the period, made at unusual times (weekends/holidays), or containing round numbers.

Common mistakes

Selecting routine entries; ignoring the 'who' and 'when' of the entry.

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