Question 1

How must an auditor address fraud in the planning stage?

Accepted Answer

A) The auditor must test for fraud in the planning stage by sampling accounts. 
B) The auditor must consider the likelihood of fraud existing in the company in the planning stage. 
C) The auditor must realize that most people are honest and not automatically assume that fraud exists when planning the audit. 
D) The auditor must not be aggressive in its initial approach to fraud as trust may be lost by the client. 
A) The auditor must test for fraud in the planning stage by sampling accounts. 
B) The auditor must consider the likelihood of fraud existing in the company in the planning stage. 
C) The auditor must realize that most people are honest and not automatically assume that fraud exists when planning the audit. 
D) The auditor must not be aggressive in its initial approach to fraud as trust may be lost by the client.

Question 2

What is the best way an auditor can detect fraud in the financial statements?

Accepted Answer

A) Use professional skepticism. 
B) Understand Generally Accepted Accounting Standards. 
C) Brainstorm with the client to find the types of fraud occurring. 
D) Actively search for errors in the financial statements. 
A) Use professional skepticism. 
B) Understand Generally Accepted Accounting Standards. 
C) Brainstorm with the client to find the types of fraud occurring. 
D) Actively search for errors in the financial statements.

Question 3

Why is fraud detection an important part of the audit?

Accepted Answer

A) Auditors are required to seek out and find all fraud,regardless of its magnitude. 
B) Auditors expect that management will make them aware of any fraud in the financial statements. 
C) Society expects that financial statements have not been materially misstated due to fraud. 
D) Society realizes that some fraud was not intended to be discovered by auditors. 
A) Auditors are required to seek out and find all fraud,regardless of its magnitude. 
B) Auditors expect that management will make them aware of any fraud in the financial statements. 
C) Society expects that financial statements have not been materially misstated due to fraud. 
D) Society realizes that some fraud was not intended to be discovered by auditors.

Question 4

When preliminary fraud risk is high the auditor should pay close attention to areas of the audit that are highly subjective and should increase the predictability of the audit procedures.

Accepted Answer

A) True 
 B)False

Question 5

The onslaught of fraud in financial statements over the recent decade has been the first of its kind in history.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following items are registered audit firms not required to report to the audit committee?

Accepted Answer

A) Critical accounting policies and practices. 
B) Alternative treatments of financial information within generally accepted accounting principles that have been considered by management,as well as the preferred treatment of the audit firm. 
C) A list of all audit procedures performed. 
D) Significant written communications between the audit firm and management. 
A) Critical accounting policies and practices. 
B) Alternative treatments of financial information within generally accepted accounting principles that have been considered by management,as well as the preferred treatment of the audit firm. 
C) A list of all audit procedures performed. 
D) Significant written communications between the audit firm and management.

Question 7

Managers of organizations are hired by Boards of Directors to perform responsibilities such as the implementation of internal control.

Accepted Answer

A) True 
 B)False

Question 8

Once the fraud assessment is complete in the planning stage,the auditor need not consider fraud further.

Accepted Answer

A) True 
 B)False

Question 9

How will the results of the auditor's assessment of fraud risk factors affect the planned audit procedures?

Accepted Answer

A) Audit procedures and fraud assessment do not relate. 
B) The assessment may require a re-audit of previous periods. 
C) Qualified audit staff will be assigned to relevant areas of the engagement. 
D) Management will be called upon to assist in coordinating audit procedures. 
A) Audit procedures and fraud assessment do not relate. 
B) The assessment may require a re-audit of previous periods. 
C) Qualified audit staff will be assigned to relevant areas of the engagement. 
D) Management will be called upon to assist in coordinating audit procedures.

Question 10

Linking internal deficiencies to audit procedures After assessing internal control weakness the auditor develops audit procedures to explicitly test for the existence of the types of fraud or misstatement that could occur because of the weakness.In the linkage process from control deficiencies to audit procedures,what are the four questions involved in linking changes to the audit program?

Accepted Answer

The auditor has to consider what could g

Question 11

What is the primary determinate in the difference between fraud and errors in financial statement reporting?

Accepted Answer

A) The materiality of the misstatement. 
B) The intent to deceive. 
C) The level of management involved. 
D) The type of transaction affected. 
A) The materiality of the misstatement. 
B) The intent to deceive. 
C) The level of management involved. 
D) The type of transaction affected.

Question 12

Who should the auditors first notify if they discover a material misappropriation of assets?

Accepted Answer

A) The PCAOB. 
B) The SEC. 
C) The management of the company. 
D) The audit committee of the company. 
E) They are not required to notify anyone. 
A) The PCAOB. 
B) The SEC. 
C) The management of the company. 
D) The audit committee of the company. 
E) They are not required to notify anyone.

Question 13

If management makes appropriate adjustments to correct the implications of a fraud discovered in a financial statement audit,but does not take appropriate steps to modify internal controls,upon what does this have a direct impact?

Accepted Answer

A) The auditor's opinion on the financial statements. 
B) The client's executive compensation. 
C) The auditor's perception of the overall control environment. 
D) All previous work performed by the auditor on this client. 
A) The auditor's opinion on the financial statements. 
B) The client's executive compensation. 
C) The auditor's perception of the overall control environment. 
D) All previous work performed by the auditor on this client.

Question 14

Auditors are required to inform the audit committee of any significant audit adjustments discovered during the engagement.

Accepted Answer

A) True 
 B)False

Question 15

Auditors must keep a questioning mind when analyzing management responses to inquiry and auditors should strive to obtain corroborating evidence before accepting the management responses.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is the most common type of fraudulent financial reporting?

Accepted Answer

A) Capitalizing major overhauls to operating equipment. 
B) Deferring service revenue until it is delivered to customers. 
C) Including as sales inventory sold with the right to return. 
D) Excluding a contingent liability that has been settled. 
A) Capitalizing major overhauls to operating equipment. 
B) Deferring service revenue until it is delivered to customers. 
C) Including as sales inventory sold with the right to return. 
D) Excluding a contingent liability that has been settled.

Question 17

Pressure upon management to manipulate financial information is a common characteristic in fraud cases.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following represents the size of company that has historically committed fraudulent financial reporting or that has experienced asset misappropriation by its employees?

Accepted Answer

A) Large corporations. 
B) Middle-market corporations. 
C) Small and start-up companies. 
D) All companies. 
A) Large corporations. 
B) Middle-market corporations. 
C) Small and start-up companies. 
D) All companies.

Question 19

Which of the following statements about fraud or fraud detection is true?

Accepted Answer

A) Management may physically alter evidence to perpetrate and conceal the fraud. 
B) Most fraudulent financial reporting is not material enough to consider. 
C) Journal entries do not supply evidence necessary to detect fraud. 
D) The advent of new technology prevents fraud,thereby leading to less fraud over time. 
A) Management may physically alter evidence to perpetrate and conceal the fraud. 
B) Most fraudulent financial reporting is not material enough to consider. 
C) Journal entries do not supply evidence necessary to detect fraud. 
D) The advent of new technology prevents fraud,thereby leading to less fraud over time.

Question 20

Any major disagreement the auditor has with management should be discussed with the audit committee.

Accepted Answer

A) True 
 B)False

How must an auditor address fraud in the planning stage?

What is the best way an auditor can detect fraud in the financial statements?

Why is fraud detection an important part of the audit?

When preliminary fraud risk is high the auditor should pay close attention to areas of the audit that are highly subjective and should increase the predictability of the audit procedures.

The onslaught of fraud in financial statements over the recent decade has been the first of its kind in history.

Which of the following items are registered audit firms not required to report to the audit committee?

Managers of organizations are hired by Boards of Directors to perform responsibilities such as the implementation of internal control.

Once the fraud assessment is complete in the planning stage,the auditor need not consider fraud further.

How will the results of the auditor's assessment of fraud risk factors affect the planned audit procedures?

What is the primary determinate in the difference between fraud and errors in financial statement reporting?

Who should the auditors first notify if they discover a material misappropriation of assets?

If management makes appropriate adjustments to correct the implications of a fraud discovered in a financial statement audit,but does not take appropriate steps to modify internal controls,upon what does this have a direct impact?

Auditors are required to inform the audit committee of any significant audit adjustments discovered during the engagement.

Auditors must keep a questioning mind when analyzing management responses to inquiry and auditors should strive to obtain corroborating evidence before accepting the management responses.

Which of the following is the most common type of fraudulent financial reporting?

Pressure upon management to manipulate financial information is a common characteristic in fraud cases.

Which of the following represents the size of company that has historically committed fraudulent financial reporting or that has experienced asset misappropriation by its employees?

Which of the following statements about fraud or fraud detection is true?

Any major disagreement the auditor has with management should be discussed with the audit committee.

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

How must an auditor address fraud in the planning stage?

What is the best way an auditor can detect fraud in the financial statements?

Why is fraud detection an important part of the audit?

When preliminary fraud risk is high the auditor should pay close attention to areas of the audit that are highly subjective and should increase the predictability of the audit procedures.

The onslaught of fraud in financial statements over the recent decade has been the first of its kind in history.

Which of the following items are registered audit firms not required to report to the audit committee?

Managers of organizations are hired by Boards of Directors to perform responsibilities such as the implementation of internal control.

Once the fraud assessment is complete in the planning stage,the auditor need not consider fraud further.

How will the results of the auditor's assessment of fraud risk factors affect the planned audit procedures?

What is the primary determinate in the difference between fraud and errors in financial statement reporting?

Who should the auditors first notify if they discover a material misappropriation of assets?

If management makes appropriate adjustments to correct the implications of a fraud discovered in a financial statement audit,but does not take appropriate steps to modify internal controls,upon what does this have a direct impact?

Auditors are required to inform the audit committee of any significant audit adjustments discovered during the engagement.

Auditors must keep a questioning mind when analyzing management responses to inquiry and auditors should strive to obtain corroborating evidence before accepting the management responses.

Which of the following is the most common type of fraudulent financial reporting?

Pressure upon management to manipulate financial information is a common characteristic in fraud cases.

Which of the following represents the size of company that has historically committed fraudulent financial reporting or that has experienced asset misappropriation by its employees?

Which of the following statements about fraud or fraud detection is true?

Any major disagreement the auditor has with management should be discussed with the audit committee.

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