Which of the following factors most likely would cause an auditor to question the integrity of management?
A.Management has an aggressive attitude toward financial reporting and meeting profit goals.
B.Managerial decisions are dominated by one person who is also a stockholder.
C.Weaknesses in internal control reported to the audit committee are not corrected by management.
D.Audit tests detect material fraud that was known to management, but not disclosed to the auditor.
D.Audit tests detect material fraud that was known to management, but not disclosed to the auditor.Answer (D) is correct. The auditors request written representations from management. These include disclosures of fraud or suspected fraud affecting the entity involving (1) management, (2) employees who participate significantly in internal control, and (3) others if the fraud is material. If management fails to provide written representations about such matters, the auditor should (1) reevaluate management’s integrity, (2) determine the possible effect on the opinion, and (3) withdraw from the engagement in appropriate circumstances (AU-C 580).