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

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?

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

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

Various types of ways that fraud could be perpetrated should be hypothesized by the auditor prior to conducting audit testing.

Which of the following facts should be communicated by the auditor to the audit committee?

The auditor is responsible for actively considering fraud risks in order to obtain reasonable assurance that the financial statements are free of material fraud.

Audit committees of publicly traded companies must establish whistleblowing mechanisms within the company.

An example of fraudulent financial reporting is the CFO intentionally overstating sales to boost profits.

Which of the following is an example of fraud?

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

Auditors need to consider fraud arising from misappropriation of assets and fraudulent financial reporting.

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

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?

Which of the following best describes how corporate governance influences an organization?

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

There are many important reasons for diligent audit planning. If an audit firm wrongly skips the planning stage of an audit, what will be the effect relative to fraud detection?

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

How often does the PCAOB inspect registered accounting firms that audit fewer than 100 issuers?

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

The auditor must perform a brainstorming session with client management in order to plan the procedures to be performed.