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due to fraud in an entitys inancial statements? O 1. The entitys industry is experiencing declining customer demand O 2. Employees who handle cash receipts are not bondod O 3. Internal auditors have direct access to the board of drectors and the enttys management of directors is active in overseoing the entitys financial reporting pokcies
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Answer is 1 The entitys industry is experiencing declining customer demand. Explanation It is an inhcrent risk. The highcr the level of inhcrent risk, the more likcly that a clients financial statements are materially misstated. Because there is a high chance of manipulation of accounts in order to show the better results on the financial statements.

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