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Which of the following circumstances most likely would cause an auditor to suspect that there are
material misstatements in an entity’s financial statements?
A. There are unusual discrepancies between the entity’s records and confirmation replies.
B. Management enforces strict budgetary controls over the entity’s departmental supervisors.
C. Cash transactions are electronically processed and recorded, leaving no paper audit trail.
D. The monthly bank reconciliation ordinarily includes several large outstanding checks.
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