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Vadnais Lake Area Water <br />Management Organization <br />Management Information <br />Identifying and Assessing Fraud Risks <br />• Required to presume that improper revenue recognition is a fraud risk. <br />• Required tests in response to the risk of management override of controls. <br />o Examining journal entries and other adjustments. <br />o Retrospective review of accounting estimates. <br />o Business rationale for significant unusual transactions. <br />Responding to Assessed Risks: <br />• Assignment of personnel and supervision should be commensurate with the auditor's <br />assessment of the risks of material misstatement due to fraud. <br />• The auditor should consider management's selection and application of significant <br />accounting principles. <br />• Auditors are required to incorporate an element of unpredictability in audit procedures <br />from year to year. <br />Evaluating Audit Evidence <br />• Assessing risks of material misstatement due to fraud throughout the audit. <br />• Evaluating whether analytical procedures performed as substantive tests or in the overall <br />review stage of the audit indicate a previously unrecognized risk of material misstatement <br />due to fraud. <br />• Evaluating the risks of material misstatement due to fraud at or near the completion of <br />fieldwork. <br />• Responding to misstatements that may be the result of fraud. <br />3 <br />