Exam 5: Fraud in Financial Statements and Auditor Responsibilities

An auditor concludes that a client has committed an illegal act that has not been properly accounted for or disclosed. The auditor is most likely to withdraw from the engagement when the:

Which of the following is not a consideration in determining a measure of materiality?

The Private Securities Litigation Reform Act imposes additional requirements on public companies reporting to the SEC and their auditors when:

The case which deals with assigning a quality review partner to an audit is:

The purpose of the fraud triangle is to identify:

Which of the following is not true of "reasonable assurance"?

Which of the following is NOT one of the communications that should be made by external auditors to the audit committee?

All of the following are in a position to commit fraud except:

The auditors' determination of whether the financial statements "present fairly" is based on:

In which of the following circumstances would a qualified opinion be appropriate?

Some critics claim the usefulness of the audit report is limited because:

In the Loyalty and Fraud Reporting case, Ethan Lester pressured his friend Vick Jensen to:

In gathering audit evidence, the accessibility of information may be a factor thereby influencing which judgment trigger?

Campus Fast is a new audit client. Client Fast uses public WiFi to place and deliver restaurant take out for students at the Up and Coming State University. Campus Fast was founded by three highly ambitious MBA students at the university. The business plan is to find a buyer or place an IPO of the company by graduation in two years. The founders expect to pay off all student loans, take a tour around the world and then start another company. In order for the business plan to work on the timeline for graduation, the business must meet highly ambitious earnings numbers. Additionally, the company is dealing with two situations that the founders would like to keep from the auditors: 1) The company has been using free, unsecured public WiFi to take orders via the Internet. The customer may pay via the Internet. Several students, who all happen to be members of the same student organization on campus, are claiming that using Campus Fast has allowed their identity to be stolen. One student is claiming that she had $12,000 of charges on her credit card to the unsecured Internet site of Campus Fast. Management plans to pay off the complaining students and keep the true liability off the balance sheet. The reason is Campus Fast is concerned that an interested buyer may become concerned about the unsecured site and might get scared by the student complaints. "2) The company guarantees fast delivery. It has offered to pay any speeding or other moving violation tickets to its delivery drivers. Unfortunately, one of the drivers was involved in an accident due to running a red light. The passenger in the other car is in critical condition and the intensive care unit in the hospital. The driver has promised the family of the passenger that the company will make good on any expenses and admitted the company policy on repaying all traffic tickets. Attorneys for the injured party are threatening to sue and publicize the situation. The founders do not have enough cash to take care of this problem but are still trying to keep the situation from the auditors and potential buyer. Using the internal control framework assess the internal controls at Campus Fast and risk environment."

If the financial statements are not materially misstated for a nonpublic company, the auditor should give a(an):

Audit procedures are different than audit evidence because:

Auditors are required to communicate with the audit committee for all but which of the following:

Gathering and objectively evaluating audit evidence requires the auditor to consider:

Misstatements in the financial statements are most likely to occur when there are:

Which of the following is not part of the fraud triangle?