[266]Which of the following procedures would an auditor most likely perform during an auditengagement's overall review stage in formulating an opinion on an entity's financial statements?A. Obtain assurance from the entity's attorney that all material litigation has been disclosed in thefinancial statements.B. Verify the clerical accuracy of the entity's proof of cash and its bank cutoff statement.C. Determine whether inadequate provisions for the safeguarding of assets have been corrected.D. Consider whether the results of audit procedures affect the assessment of the risk of materialmisstatement due to fraud.•Answer (A) is incorrect because obtaining assurances from the client's attorney is a procedureperformed during the audit and therefore prior to the overall review stage.•Answer (B) is incorrect because conducting substantive tests of cash is a procedure performedduring the audit and therefore prior to the overall review stage.•Answer (C) is incorrect because determining whether inadequate controls have been improved is aprocedure performed during the audit and therefore prior to the overall review stage.•Answer (D) iscorrect. AU 316 states that the risk of material misstatement due to fraud must bespecifically assessed. This assessment is ongoing. Thus, at the audit's conclusion, the results of theaudit procedures and other observations should be evaluated to determine whether they alter theassessment. This process is a qualitative one based on the judgment of the auditor.[267]In a financial statement audit, substantial consideration must be given to potential fraud. Theconditions for fraud ordinarily includeA. Unintentional or intentional misstatements.B. Misappropriation of assets.
