Exam 2: The Risk of Fraud and Mechanisms to Address Fraud: Regulation,corporate Governance,and Audit Quality

In considering corporate governance responsibilities and accountabilities,which of the following are considered stakeholders to whom the board of directors,management,and internal auditors are accountable?

Which of the following situations represents a risk factor that relates to misstatements arising from misappropriation of assets?

Rationalization involves the mindset of the fraudster to justify committing the fraud.

Audit Committee Responsibilities Describe the responsibilities of audit committees,and list at least four responsibilities that the NYSE has mandated for audit committees.

The objective of financial reporting is to provide useful information to interested users.

Professional skepticism involves such things as questioning and corroborating management responses to inquiries and determining the authenticity of documents.

According to professional audit standards,how might an understanding of the nature of fraud that may occur in the client organization be identified by an audit firm?

How did the Sarbanes-Oxley Act strengthen auditor independence?

Enron: A Fraud Example What were the failures that allowed the Enron fraud to occur?

An audit committee must be comprised of outside directors and at least one outside financial expert.An individual with which of the following characteristics is considered an outside director?

Which of the following is an example of fraud?

The audit team should develop its own ideas about how fraud may be performed by the client and then covered up.

Who is the client in an audit engagement?

Protection Transparency,Inc.is being audited by Messer and Bromely,LLP.During the assessment of fraud,Messer and Bromely discover that the controller has been creating fictional sales and posting them to the general ledger.Who should the auditors make aware of this issue?

Professional skepticism is required on audit engagements that have a high risk of fraud but can be disregarded for all other engagements.

Which of the following creates an opportunity for fraud to be committed in an organization?

The audit committee should have the authority to hire and fire the external auditor.

The fraud triangle has three components.Which of the components must be present for a fraud to occur?

Which of the following best represents actions that may indicate fraud is pervasive throughout the company under audit?

The auditor is not responsible for the presentation of financial statements; therefore,the auditor has no responsibility for fraud in the financial statements.