Which of the following are significant risks requiring special audit consideration?

• A. Fraud
• B. Complex transactions
• C. Transactions with related parties
• D. All of the above

Answer: (D)

Significant risks requiring special audit consideration come from areas that are more prone to misstatement or demand careful judgment. Fraud risk is a priority because misstatements can be intentional, so procedures must be designed to address the possibility of management override and other fraudulent activity, with professional skepticism and unpredictable audit steps. Complex transactions need close scrutiny of terms, models, and estimates, since they involve significant judgment and may rely on sophisticated accounting treatments or fair value measurements. Related-party transactions require diligent identification, assessment of terms, and disclosure checks to ensure they are at arm’s length and properly presented, as these arrangements can be used to conceal improper effects or omit disclosures. Because each of these factors raises inherent or control risks, they all require special audit consideration. All of the above.