Exam 2: The Auditors Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

Which of the following is a common incentive or condition which increases the likelihood for fraudulent financial reporting?

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(Multiple Choice)

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Question 1

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What type of fraud occurs when the deposits of current investors are used to pay returns on the deposits of previous investors with no real investment happening?

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(Multiple Choice)

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Question 2

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Auditor's response to fraud risk factors. The auditor assesses the identified fraud risks after taking into account an evaluation of the client's programs and controls. How might the auditor respond to the results of the assessment of higher fraud risk?

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(Essay)

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Question 3

Correct Answer:

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The auditor should consider:
-Professional skepticism
a) Obtain more reliable evidence
b) Obtain additional corroborating evidence.
-Assignment of personnel and supervision--specialists or more experienced personnel
-More careful consideration of management’s selection and application of accounting
principles
-Adding an element of unpredictability to auditing procedures
The auditor may change the nature, timing and extent of the audit procedures to be performed by increasing the extent of procedures, making them more persuasive, and moving more of them to the balance sheet date or later.
The response may involve the performance of procedures to further consider the risk related to:
a) Revenue recognition
b) Inventory quantities
c) Management estimates
Responses to consider the risk of management override of controls may include:
a) Examine journal entries and other adjustments made in preparation of financial statements
b) Review accounting estimates for biases
c) Evaluate business rationale for significant unusual transactions

Formulating corporate strategy and risk management policy is primarily the responsibility of the Board of Directors.

(True/False)

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Question 4

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

(Multiple Choice)

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Question 5

The Center for Audit Quality (CAQ) report identifies which of the following ways in which individuals involved in the financial reporting process can mitigate the risk of fraudulent financial reporting?

(Multiple Choice)

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Question 6

Which of the following are management responsibilities under the Sarbanes-Oxley Act of 2002?

(Multiple Choice)

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Question 7

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

(True/False)

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Question 8

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.

(True/False)

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Question 9

Which of the following is a stated principle of a NYSE report identifying key core governance principles?

(Multiple Choice)

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Question 10

The Sarbanes-Oxley Act significantly enhanced criminal penalties for crimes involving the destruction or alteration of corporate audit records.

(True/False)

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Question 11

One fraud risk factor includes the presence of domineering members of management who seek the ultimate loyalty of subordinates.

(True/False)

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Question 12

According to COSO studies, the majority of the frauds took place at companies that were listed on the Over-The-Counter (OTC) market, rather than those listed on the NYSE or NASDAQ.

(True/False)

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Question 13

Which of the following frauds involved primarily asset misappropriation?

(Multiple Choice)

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Question 14

The audit committee must be composed of outsiders such as the organization's attorney and audit partner.

(True/False)

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Question 15

The audit committee is a subcommittee of the board of directors comprised of independent outside directors.

(True/False)

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Question 16

Which of the following is a responsibility of the PCAOB?

(Multiple Choice)

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Question 17

Which of the following statements reflects an auditor's responsibility for detecting?fraud?

(Multiple Choice)

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Question 18

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

(Multiple Choice)

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Question 19

Which of the following statements about the Bernie Madoff ponzi scheme is false?

(Multiple Choice)

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Question 20

Showing 1 - 20 of 120

Which of the following is a common incentive or condition which increases the likelihood for fraudulent financial reporting?

What type of fraud occurs when the deposits of current investors are used to pay returns on the deposits of previous investors with no real investment happening?

Auditor's response to fraud risk factors. The auditor assesses the identified fraud risks after taking into account an evaluation of the client's programs and controls. How might the auditor respond to the results of the assessment of higher fraud risk?

Formulating corporate strategy and risk management policy is primarily the responsibility of the Board of Directors.

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

The Center for Audit Quality (CAQ) report identifies which of the following ways in which individuals involved in the financial reporting process can mitigate the risk of fraudulent financial reporting?

Which of the following are management responsibilities under the Sarbanes-Oxley Act of 2002?

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

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 a stated principle of a NYSE report identifying key core governance principles?

The Sarbanes-Oxley Act significantly enhanced criminal penalties for crimes involving the destruction or alteration of corporate audit records.

One fraud risk factor includes the presence of domineering members of management who seek the ultimate loyalty of subordinates.

According to COSO studies, the majority of the frauds took place at companies that were listed on the Over-The-Counter (OTC) market, rather than those listed on the NYSE or NASDAQ.

Which of the following frauds involved primarily asset misappropriation?

The audit committee must be composed of outsiders such as the organization's attorney and audit partner.

The audit committee is a subcommittee of the board of directors comprised of independent outside directors.

Which of the following is a responsibility of the PCAOB?

Which of the following statements reflects an auditor's responsibility for detecting?fraud?

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

Which of the following statements about the Bernie Madoff ponzi scheme is false?

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