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

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BruceCo. has accounted for the revenue of Jiffy Mac, Inc., one of its suppliers as though it were its subsidiary. BruceCo. has probably committed fraud because of its misapplication of consolidation principles.

(True/False)

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Question 61

Which of the following situations represents a risk factor that relates to misstatements arising from misappropriation of assets?

(Multiple Choice)

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Question 62

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

(True/False)

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Question 63

What should an audit team do when it discovers that fraud risk factors are present on an audit engagement?

(Multiple Choice)

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(40)

Question 64

Under the Sarbanes-Oxley Act, which of the following services performed by registered accounting firms for their audit clients would not impair their independence?

(Multiple Choice)

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Question 65

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

(True/False)

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Question 66

Which of the following is a specific corporate governance responsibility of Executive Management?

(Multiple Choice)

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Question 67

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.

(Essay)

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Question 68

Consideration of fraud in an audit. Auditors are required to actively conduct a financial statement audit with the mindset that fraud may exist. What is the general process that an auditor goes through to assess the risk of fraud and test accordingly?

(Essay)

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Question 69

Implementing an effective ethical environment is primarily the responsibility of the audit committee of the Board of Directors.

(True/False)

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Question 70

Protection Transparency, Inc. is being audited by Messer and Bromely, LLP. During the assessment of fraud, Messer and Bromely discover that the controller has been creating fictional sales and posting them to the general ledger. Who should the auditors make aware of this issue?

(Multiple Choice)

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(42)

Question 71

Rationalization involves the mindset of the fraudster to justify committing the fraud.

(True/False)

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Question 72

One of the primary goals of the PCAOB is to restore confidence in which group?

(Multiple Choice)

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(41)

Question 73

How did the Sarbanes-Oxley Act strengthen auditor independence?

(Multiple Choice)

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Question 74

Which of the following factors should an auditor consider in evaluating the effect of fraud upon the planned audit procedures?

(Multiple Choice)

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Question 75

When fraud risk is great in the organization under audit, procedures applied are likely to be more extensive.

(True/False)

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(41)

Question 76

Successful corporate governance depends upon successful management of the company, as management has the primary responsibility for creating a culture of performance with integrity and ethical behavior.

(True/False)

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(34)

Question 77

Why is fraud detection an important part of the audit?

(Multiple Choice)

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(39)

Question 78

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

(True/False)

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Question 79

An example of fraudulent financial reporting is the treasurer's diversion of hundreds of thousands of dollars into a personal money market account.

(True/False)

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Question 80

Showing 61 - 80 of 120

BruceCo. has accounted for the revenue of Jiffy Mac, Inc., one of its suppliers as though it were its subsidiary. BruceCo. has probably committed fraud because of its misapplication of consolidation principles.

Which of the following situations represents a risk factor that relates to misstatements arising from misappropriation of assets?

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

What should an audit team do when it discovers that fraud risk factors are present on an audit engagement?

Under the Sarbanes-Oxley Act, which of the following services performed by registered accounting firms for their audit clients would not impair their independence?

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

Which of the following is a specific corporate governance responsibility of Executive Management?

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.

Consideration of fraud in an audit. Auditors are required to actively conduct a financial statement audit with the mindset that fraud may exist. What is the general process that an auditor goes through to assess the risk of fraud and test accordingly?

Implementing an effective ethical environment is primarily the responsibility of the audit committee of the Board of Directors.

Protection Transparency, Inc. is being audited by Messer and Bromely, LLP. During the assessment of fraud, Messer and Bromely discover that the controller has been creating fictional sales and posting them to the general ledger. Who should the auditors make aware of this issue?

Rationalization involves the mindset of the fraudster to justify committing the fraud.

One of the primary goals of the PCAOB is to restore confidence in which group?

How did the Sarbanes-Oxley Act strengthen auditor independence?

Which of the following factors should an auditor consider in evaluating the effect of fraud upon the planned audit procedures?

When fraud risk is great in the organization under audit, procedures applied are likely to be more extensive.

Successful corporate governance depends upon successful management of the company, as management has the primary responsibility for creating a culture of performance with integrity and ethical behavior.

Why is fraud detection an important part of the audit?

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

An example of fraudulent financial reporting is the treasurer's diversion of hundreds of thousands of dollars into a personal money market account.

Auditing: Integral to the Economy

Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditors

Professional Liability, Auditor Judgment Frameworks, and Professional Responsibilities

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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