Question 1

In actively considering fraud in the financial statement audit, the audit team will most likely realise which of the following when performing substantive procedures?

Accepted Answer

A)  Accounting journal entries may have been used to perpetrate a fraud. 
B)  Most fraud is not material enough to consider. 
C)  Journal entries do not supply enough evidence to detect fraud. 
D)  New technology prevents fraud more thoroughly than manual systems. 
A)  Accounting journal entries may have been used to perpetrate a fraud. 
B)  Most fraud is not material enough to consider. 
C)  Journal entries do not supply enough evidence to detect fraud. 
D)  New technology prevents fraud more thoroughly than manual systems. A

Question 2

If an auditor discovers risk of fraud in the application of ASA 240 procedures, the audit procedures should be adjusted accordingly.

Accepted Answer

A) True 
 B)False  True

Question 3

Brainstorming for fraud
You are a staff auditor with Zepplin and Frank, public accountants. Your audit team is in the planning stage for Leppard Sullivan Ltd, a beauty supply wholesaler. Describe the brainstorming process and types of issues that may be brought to the surface regarding your client.

Accepted Answer

All members of the audit team must be assembled to consider the possibility of fraud at Leppard Sullivan. Management motivations will be discussed as well as weaknesses in internal control and preliminary analytics. The auditors may discuss how they will conduct the audit with professional scepticism and a questioning mind. According to ASA 240, the following should be considered in the brainstorming session:
-Consider how fraud can be perpetrated and covered up.
-Presume fraud in revenue recognition.
-Consider incentives, opportunities and rationalisation for fraud.
-Consider industry conditions.
-Consider operating characteristics and financial stability.
The audit team must not just go through the motions of conducting this brainstorming. It must be a thorough and integral part of the audit approach.

Question 4

Management fraud must be immediately reported by the auditor to ASIC rather than wasting time reporting it to the audit committee or board of directors.

Accepted Answer

A) True 
 B)False

Question 5

Management rarely uses journal entries to commit fraud because they are easily noticed by the auditor.

Accepted Answer

A) True 
 B)False

Question 6

Consideration of fraud in financial report audits is a relatively new concept.

Accepted Answer

A) True 
 B)False

Question 7

ASA 240 procedures must only be performed for clients that have had fraud concerns in the past.

Accepted Answer

A) True 
 B)False

Question 8

Rules-based accounting sometimes contributes to the rationalisation of fraudulent financial reporting.

Accepted Answer

A) True 
 B)False

Question 9

ASA 240 requires the auditor to more actively consider and assess the risk of fraud for clients and their financial reports than has been required in the past.

Accepted Answer

A) True 
 B)False

Question 10

Bangalow Ltd has accounted for the revenue of one of its suppliers, Jiffy Mac Pty Ltd, as though it were its subsidiary. Bangalow Ltd only owns 2 per cent of Jiffy and does not exercise any influence or control, nor is it considered a minority interest. Bangalow Ltd has probably committed fraud because of its blatant misapplication of consolidation principles.

Accepted Answer

A) True 
 B)False

Question 11

An example of a fraud is the Chief Financial Officer (CFO) intentionally overstating the accounts receivable and sales to boost profits.

Accepted Answer

A) True 
 B)False

Question 12

The KPMG 2010 fraud survey reports that larger organisations are more likely to experience fraud than smaller ones.

Accepted Answer

A) True 
 B)False

Question 13

Channel stuffing is often a form of fraud by financial manipulation and can be noticed by the auditor by performing analytical procedures directed toward the discovery of fraud indicators.

Accepted Answer

A) True 
 B)False

In actively considering fraud in the financial statement audit, the audit team will most likely realise which of the following when performing substantive procedures?

If an auditor discovers risk of fraud in the application of ASA 240 procedures, the audit procedures should be adjusted accordingly.

Brainstorming for fraud You are a staff auditor with Zepplin and Frank, public accountants. Your audit team is in the planning stage for Leppard Sullivan Ltd, a beauty supply wholesaler. Describe the brainstorming process and types of issues that may be brought to the surface regarding your client.

Management fraud must be immediately reported by the auditor to ASIC rather than wasting time reporting it to the audit committee or board of directors.

Management rarely uses journal entries to commit fraud because they are easily noticed by the auditor.

Consideration of fraud in financial report audits is a relatively new concept.

ASA 240 procedures must only be performed for clients that have had fraud concerns in the past.

Rules-based accounting sometimes contributes to the rationalisation of fraudulent financial reporting.

ASA 240 requires the auditor to more actively consider and assess the risk of fraud for clients and their financial reports than has been required in the past.

An example of a fraud is the Chief Financial Officer (CFO) intentionally overstating the accounts receivable and sales to boost profits.

The KPMG 2010 fraud survey reports that larger organisations are more likely to experience fraud than smaller ones.

Channel stuffing is often a form of fraud by financial manipulation and can be noticed by the auditor by performing analytical procedures directed toward the discovery of fraud indicators.

Assurance and Auditing: Integral to the Economy

Corporate Governance and Audits

Judgemental and Ethical Decision-Making Frameworks and Associated Professional Standards

Professional Liabilit

Audit Risk, Business Risk, and Audit Planning

Internal Control Over Financial Reporting

Audit Evidence: A Framework

Tests of Control and Substantive Test Implications

Tools to Gather Audit Evidence

Auditing Revenue, Related Accounts, Audit of Acquisition and Payment Cycle and Inventory

Audit of Cash and Other Liquid Assets

Audit of Long-Lived Assets and Related Expense Accounts

Audit of Long-Term Liabilities, Equity, Acquisitions and Related-Entity Transactions

Completing the Audit or Review

Audit, Review and Other Reports

Advanced Topics Concerning Complex Auditing Judgements

Filters

Exam 10: Auditing for Fraud

In actively considering fraud in the financial statement audit, the audit team will most likely realise which of the following when performing substantive procedures?

If an auditor discovers risk of fraud in the application of ASA 240 procedures, the audit procedures should be adjusted accordingly.

Brainstorming for fraud You are a staff auditor with Zepplin and Frank, public accountants. Your audit team is in the planning stage for Leppard Sullivan Ltd, a beauty supply wholesaler. Describe the brainstorming process and types of issues that may be brought to the surface regarding your client.

Management fraud must be immediately reported by the auditor to ASIC rather than wasting time reporting it to the audit committee or board of directors.

Management rarely uses journal entries to commit fraud because they are easily noticed by the auditor.

Consideration of fraud in financial report audits is a relatively new concept.

ASA 240 procedures must only be performed for clients that have had fraud concerns in the past.

Rules-based accounting sometimes contributes to the rationalisation of fraudulent financial reporting.

ASA 240 requires the auditor to more actively consider and assess the risk of fraud for clients and their financial reports than has been required in the past.

An example of a fraud is the Chief Financial Officer (CFO) intentionally overstating the accounts receivable and sales to boost profits.

The KPMG 2010 fraud survey reports that larger organisations are more likely to experience fraud than smaller ones.

Channel stuffing is often a form of fraud by financial manipulation and can be noticed by the auditor by performing analytical procedures directed toward the discovery of fraud indicators.

Assurance and Auditing: Integral to the Economy

Corporate Governance and Audits

Judgemental and Ethical Decision-Making Frameworks and Associated Professional Standards

Professional Liabilit

Audit Risk, Business Risk, and Audit Planning

Internal Control Over Financial Reporting

Audit Evidence: A Framework

Tests of Control and Substantive Test Implications

Tools to Gather Audit Evidence

Auditing Revenue, Related Accounts, Audit of Acquisition and Payment Cycle and Inventory

Audit of Cash and Other Liquid Assets

Audit of Long-Lived Assets and Related Expense Accounts

Audit of Long-Term Liabilities, Equity, Acquisitions and Related-Entity Transactions

Completing the Audit or Review

Audit, Review and Other Reports

Advanced Topics Concerning Complex Auditing Judgements

Filters