Question 1

Transparency is a desirable,but not critical,element of effective corporate governance.

Accepted Answer

A) True 
 B)False

Question 2

PCAOB Independence Standards What are four requirements of the Sarbanes-Oxley that seek to protect auditor independence?

Accepted Answer

Sarbanes-Oxley: Auditor Independence 201

Question 3

Which of the following is not one of management's responsibilities?

Accepted Answer

A) Ensuring accounting principles are following in preparing financial statements. 
B) Engaging a qualified auditor. 
C) Implementing effective internal controls. 
D) Ensuring financial statements and disclosures are accurate. 
A) Ensuring accounting principles are following in preparing financial statements. 
B) Engaging a qualified auditor. 
C) Implementing effective internal controls. 
D) Ensuring financial statements and disclosures are accurate.

Question 4

Which of the following statements best describes the outcome of the auditor discovering fraud in the financial statements?

Accepted Answer

A) The outcome will depend on the type of the fraud,along with its materiality. 
B) Management must disclose any and all fraud directly in the footnotes. 
C) The auditor is required to include a full description of the fraud in the audit report to the financial statements. 
D) There is no bearing on the financial statements by fraud that is discovered by the auditor. 
A) The outcome will depend on the type of the fraud,along with its materiality. 
B) Management must disclose any and all fraud directly in the footnotes. 
C) The auditor is required to include a full description of the fraud in the audit report to the financial statements. 
D) There is no bearing on the financial statements by fraud that is discovered by the auditor.

Question 5

The fraud triangle says three conditions are generally present in the client's organization when fraud occurs.Which of the following is not one of those conditions?

Accepted Answer

A) Incentives. 
B) Professional Skepticism. 
C) Opportunity. 
D) Ability to rationalize fraud. 
A) Incentives. 
B) Professional Skepticism. 
C) Opportunity. 
D) Ability to rationalize fraud.

Question 6

Fraud motivations and factors Research consistently shows that there are three factors associated with most frauds.List these factors and at least three indicators that the factor may exist for a particular company.

Accepted Answer

The answer of Fraud motivations and factors Research consistently shows...

Question 7

According to professional audit standards,the audit team should assemble early in the planning stages of an audit to conduct a fraud "brainstorming" meeting in order to determine the types of fraud that may occur with the client.

Accepted Answer

A) True 
 B)False

Question 8

An audit must be performed by persons who can make sound judgments relating to complex accounting issues.

Accepted Answer

A) True 
 B)False

Question 9

Who should the auditors first notify if they discover a material fraud?

Accepted Answer

A) The PCAOB. 
B) The SEC. 
C) The management of the company. 
D) The audit committee of the company. 
A) The PCAOB. 
B) The SEC. 
C) The management of the company. 
D) The audit committee of the company.

Question 10

Which is not an example of the theft of accounts receivable?

Accepted Answer

A) Recording discounts to customers,stealing the cash,and then reducing accounts receivable for the amount of cash stolen. 
B) Creating fictional invoices and customers and recording accounts receivable. 
C) Writing off accounts receivable as uncollectible to hide receipts taken. 
D) Posting upcoming payments to the account of a customer whose most recent payment was diverted. 
A) Recording discounts to customers,stealing the cash,and then reducing accounts receivable for the amount of cash stolen. 
B) Creating fictional invoices and customers and recording accounts receivable. 
C) Writing off accounts receivable as uncollectible to hide receipts taken. 
D) Posting upcoming payments to the account of a customer whose most recent payment was diverted.

Question 11

Which of the following best describes professional skepticism?

Accepted Answer

A) An intent to deceive. 
B) An attitude of intrusion and obstinacy. 
C) A character that does not waver. 
D) A questioning mind. 
A) An intent to deceive. 
B) An attitude of intrusion and obstinacy. 
C) A character that does not waver. 
D) A questioning mind.

Question 12

The audit team asks management for original documents related to sales contracts.Despite the team's persistence,management does not supply the documents for over two weeks.What should this audit team be most concerned with as it relates to these documents?

Accepted Answer

A) The need to complete the audit within a specified period of time. 
B) Management's possible use of the time to fabricate the documents. 
C) Discrepancies of the evidence. 
D) Conflicting evidence. 
A) The need to complete the audit within a specified period of time. 
B) Management's possible use of the time to fabricate the documents. 
C) Discrepancies of the evidence. 
D) Conflicting evidence.

Question 13

The auditor must communicate significant audit adjustments to the audit committee.

Accepted Answer

A) True 
 B)False

Question 14

Management always uses journal entries to commit fraud because they are not reviewed by auditors.

Accepted Answer

A) True 
 B)False

Question 15

A common accounts receivable fraud is lapping.Which of the following is a more sophisticated accounts receivable fraud?

Accepted Answer

A) Using journal entries to write off accounts against the allowance for doubtful accounts. 
B) Applying cash from one customer's receivable to that of another to cover the earlier deficit. 
C) Recording large discounts for the clients. 
D) Both A and C. 
A) Using journal entries to write off accounts against the allowance for doubtful accounts. 
B) Applying cash from one customer's receivable to that of another to cover the earlier deficit. 
C) Recording large discounts for the clients. 
D) Both A and C.

Question 16

Who is most often involved in perpetrating fraudulent financial reporting?

Accepted Answer

A) The auditors and the attorneys. 
B) The treasurer and the board of directors. 
C) The chief executive and chief financial officers. 
D) The shareholders and the chief operating officer. 
A) The auditors and the attorneys. 
B) The treasurer and the board of directors. 
C) The chief executive and chief financial officers. 
D) The shareholders and the chief operating officer.

Question 17

A board of directors that is actively involved in monitoring management mitigates opportunities to commit fraud.

Accepted Answer

A) True 
 B)False

Question 18

Management may feel pressure to maintain debt covenants,which is a deterrent to fraud.

Accepted Answer

A) True 
 B)False

Question 19

Audit tests do not relate to fraud testing because testing for fraud is conducted in a separate engagement.

Accepted Answer

A) True 
 B)False

Question 20

The auditor should not consider that fraud is present in revenue accounts because the auditor must remain objective.

Accepted Answer

A) True 
 B)False

Transparency is a desirable,but not critical,element of effective corporate governance.

PCAOB Independence Standards What are four requirements of the Sarbanes-Oxley that seek to protect auditor independence?

Which of the following is not one of management's responsibilities?

Which of the following statements best describes the outcome of the auditor discovering fraud in the financial statements?

The fraud triangle says three conditions are generally present in the client's organization when fraud occurs.Which of the following is not one of those conditions?

Fraud motivations and factors Research consistently shows that there are three factors associated with most frauds.List these factors and at least three indicators that the factor may exist for a particular company.

According to professional audit standards,the audit team should assemble early in the planning stages of an audit to conduct a fraud "brainstorming" meeting in order to determine the types of fraud that may occur with the client.

An audit must be performed by persons who can make sound judgments relating to complex accounting issues.

Who should the auditors first notify if they discover a material fraud?

Which is not an example of the theft of accounts receivable?

Which of the following best describes professional skepticism?

The audit team asks management for original documents related to sales contracts.Despite the team's persistence,management does not supply the documents for over two weeks.What should this audit team be most concerned with as it relates to these documents?

The auditor must communicate significant audit adjustments to the audit committee.

Management always uses journal entries to commit fraud because they are not reviewed by auditors.

A common accounts receivable fraud is lapping.Which of the following is a more sophisticated accounts receivable fraud?

Who is most often involved in perpetrating fraudulent financial reporting?

A board of directors that is actively involved in monitoring management mitigates opportunities to commit fraud.

Management may feel pressure to maintain debt covenants,which is a deterrent to fraud.

Audit tests do not relate to fraud testing because testing for fraud is conducted in a separate engagement.

The auditor should not consider that fraud is present in revenue accounts because the auditor must remain objective.

Auditing: Integral to the Economy

Internal Control Over Financial Reporting: Managements Responsibilities and Importance to the External Auditors

Professional Liability and the Need for Quality Auditor Judgments and Ethical Decisions

Professional Auditing Standards and the Audit Opinion Formulation Process

A Framework for Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Cash and Marketable Securities

Auditing Inventory, goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Lived Assets: Acquisition, use, impairment, and Disposal

Auditing Debt Obligations and Stockholders Equity Transactions

Activities Required in Completing a Quality Audit

Audit Reports on Financial Statements

Advanced Topics Concerning Complex Auditing Judgments

Other Services Provided by Audit Firms

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

Transparency is a desirable,but not critical,element of effective corporate governance.

PCAOB Independence Standards What are four requirements of the Sarbanes-Oxley that seek to protect auditor independence?

Which of the following is not one of management's responsibilities?

Which of the following statements best describes the outcome of the auditor discovering fraud in the financial statements?

The fraud triangle says three conditions are generally present in the client's organization when fraud occurs.Which of the following is not one of those conditions?

Fraud motivations and factors Research consistently shows that there are three factors associated with most frauds.List these factors and at least three indicators that the factor may exist for a particular company.

According to professional audit standards,the audit team should assemble early in the planning stages of an audit to conduct a fraud "brainstorming" meeting in order to determine the types of fraud that may occur with the client.

An audit must be performed by persons who can make sound judgments relating to complex accounting issues.

Who should the auditors first notify if they discover a material fraud?

Which is not an example of the theft of accounts receivable?

Which of the following best describes professional skepticism?

The audit team asks management for original documents related to sales contracts.Despite the team's persistence,management does not supply the documents for over two weeks.What should this audit team be most concerned with as it relates to these documents?

The auditor must communicate significant audit adjustments to the audit committee.

Management always uses journal entries to commit fraud because they are not reviewed by auditors.

A common accounts receivable fraud is lapping.Which of the following is a more sophisticated accounts receivable fraud?

Who is most often involved in perpetrating fraudulent financial reporting?

A board of directors that is actively involved in monitoring management mitigates opportunities to commit fraud.

Management may feel pressure to maintain debt covenants,which is a deterrent to fraud.

Audit tests do not relate to fraud testing because testing for fraud is conducted in a separate engagement.

The auditor should not consider that fraud is present in revenue accounts because the auditor must remain objective.

Auditing: Integral to the Economy

Internal Control Over Financial Reporting: Managements Responsibilities and Importance to the External Auditors

Professional Liability and the Need for Quality Auditor Judgments and Ethical Decisions

Professional Auditing Standards and the Audit Opinion Formulation Process

A Framework for Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Cash and Marketable Securities

Auditing Inventory, goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Lived Assets: Acquisition, use, impairment, and Disposal

Auditing Debt Obligations and Stockholders Equity Transactions

Activities Required in Completing a Quality Audit

Audit Reports on Financial Statements

Advanced Topics Concerning Complex Auditing Judgments

Other Services Provided by Audit Firms

Filters