Question 1

Fraud is more prevalent in large businesses than small businesses and not-for-profit organizations.

Accepted Answer

A) True 
 B)False  False

Question 2

The two main categories of fraud are fraudulent financial reporting and misappropriation of assets.

Accepted Answer

A) True 
 B)False  True

Question 3

Which of the following matters related to the auditor's consideration of material misstatements due to fraud are required to be documented?

Accepted Answer

A)  Reasons supporting a conclusion that there is not a significant risk of material improper expense recognition 
B)  Procedures performed to obtain information necessary to identify and assess the risks of material fraud 
C)  Results of the internal auditor's procedures performed to address the risk of management override of controls 
D)  Discussions with management regarding the hiring of a new plant manager 
A)  Reasons supporting a conclusion that there is not a significant risk of material improper expense recognition 
B)  Procedures performed to obtain information necessary to identify and assess the risks of material fraud 
C)  Results of the internal auditor's procedures performed to address the risk of management override of controls 
D)  Discussions with management regarding the hiring of a new plant manager B

Question 4

Which of the following is a category of fraud?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 5

As part of designing and performing procedures to address management override of controls,auditors must perform which of the following procedures?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 6

Fraudulent financial reporting is an intentional misstatement or omission of amounts or disclosures with the intent to deceive users.

Accepted Answer

A) True 
 B)False

Question 7

Company management is often under pressure to increase revenue and/or net income.One approach is to use a "bill and hold" arrangement.This is an example of which of the following?

Accepted Answer

A)  Significant accounting estimates 
B)  Fictitious revenue recorded 
C)  Premature revenue recognized 
D)  Alteration of cutoff documents 
A)  Significant accounting estimates 
B)  Fictitious revenue recorded 
C)  Premature revenue recognized 
D)  Alteration of cutoff documents

Question 8

Explain professional skepticism and the need for maintaining professional skepticism during an audit.

Accepted Answer

Auditing standards state that,in exercis

Question 9

An ineffective board of director oversight over financial reporting is an example of an incentives/pressures risk factor.

Accepted Answer

A) True 
 B)False

Question 10

Which party has the primary responsibility to oversee an organization's financial reporting and internal control process?

Accepted Answer

A)  The board of directors 
B)  The audit committee 
C)  Management of the company 
D)  The financial statement auditors 
A)  The board of directors 
B)  The audit committee 
C)  Management of the company 
D)  The financial statement auditors

Question 11

Research indicates that the most effective way to prevent and deter fraud is to:

Accepted Answer

A)  implement programs and controls that are based on core values embraced by the company. 
B)  hire highly ethical employees. 
C)  communicate expectations to all employees on an annual basis. 
D)  terminate employees who are suspected of committing fraud. 
A)  implement programs and controls that are based on core values embraced by the company. 
B)  hire highly ethical employees. 
C)  communicate expectations to all employees on an annual basis. 
D)  terminate employees who are suspected of committing fraud.

Question 12

Auditor's need to exhibit professional skepticism when auditing a client.This auditing standard is best expressed by which of the following?

Accepted Answer

A)  The auditor neither assumes dishonesty or honesty of management. 
B)  The auditor assumes dishonesty of management. 
C)  The auditor assumes honesty of management. 
D)  The auditor assumes management lacks integrity. 
A)  The auditor neither assumes dishonesty or honesty of management. 
B)  The auditor assumes dishonesty of management. 
C)  The auditor assumes honesty of management. 
D)  The auditor assumes management lacks integrity.

Question 13

Auditors should rely on original,rather than duplicate,copies of documents.

Accepted Answer

A) True 
 B)False

Question 14

Most frauds are discovered via a tip.

Accepted Answer

A) True 
 B)False

Question 15

Misappropriation of assets is normally perpetrated by:

Accepted Answer

A)  members of the board of directors. 
B)  employees at lower levels of the organization. 
C)  management of the company. 
D)  the internal auditors. 
A)  members of the board of directors. 
B)  employees at lower levels of the organization. 
C)  management of the company. 
D)  the internal auditors.

Question 16

Define fraud and distinguish between the two main categories of fraud.

Accepted Answer

In the context of financial statement au

Question 17

Which of the following is a factor that relates to incentives or pressures to commit fraudulent financial reporting?

Accepted Answer

A)  Significant accounting estimates involving subjective judgments 
B)  Excessive pressure for management to meet debt repayment requirements 
C)  Management's practice of making overly aggressive forecasts 
D)  High turnover of accounting, internal audit, and information technology staff 
A)  Significant accounting estimates involving subjective judgments 
B)  Excessive pressure for management to meet debt repayment requirements 
C)  Management's practice of making overly aggressive forecasts 
D)  High turnover of accounting, internal audit, and information technology staff

Question 18

What types of inquiry techniques might an auditor use when making inquiries of client personnel?
 What are the uses of each technique?

Accepted Answer

There are three main types of inquiry av

Question 19

Auditing standards specifically require auditors to identify ________ as a fraud risk in most audits.

Accepted Answer

A)  overstated assets 
B)  understated liabilities 
C)  improper revenue recognition 
D)  overstated expenses 
A)  overstated assets 
B)  understated liabilities 
C)  improper revenue recognition 
D)  overstated expenses

Question 20

Financial statements of all companies are potentially subject to manipulation.

Accepted Answer

A) True 
 B)False

Exam 11: Considering the Risk of Fraud

Fraud is more prevalent in large businesses than small businesses and not-for-profit organizations.

The two main categories of fraud are fraudulent financial reporting and misappropriation of assets.

Which of the following matters related to the auditor's consideration of material misstatements due to fraud are required to be documented?

Which of the following is a category of fraud?

As part of designing and performing procedures to address management override of controls,auditors must perform which of the following procedures?

Fraudulent financial reporting is an intentional misstatement or omission of amounts or disclosures with the intent to deceive users.

Company management is often under pressure to increase revenue and/or net income.One approach is to use a "bill and hold" arrangement.This is an example of which of the following?

Explain professional skepticism and the need for maintaining professional skepticism during an audit.

An ineffective board of director oversight over financial reporting is an example of an incentives/pressures risk factor.

Which party has the primary responsibility to oversee an organization's financial reporting and internal control process?

Research indicates that the most effective way to prevent and deter fraud is to:

Auditor's need to exhibit professional skepticism when auditing a client.This auditing standard is best expressed by which of the following?

Auditors should rely on original,rather than duplicate,copies of documents.

Most frauds are discovered via a tip.

Misappropriation of assets is normally perpetrated by:

Define fraud and distinguish between the two main categories of fraud.

Which of the following is a factor that relates to incentives or pressures to commit fraudulent financial reporting?

What types of inquiry techniques might an auditor use when making inquiries of client personnel? What are the uses of each technique?

Auditing standards specifically require auditors to identify ________ as a fraud risk in most audits.

Financial statements of all companies are potentially subject to manipulation.

The Assurance Services Market

The Audit Standards Setting Process

Audit Reports

Legal Liability Considerations for Auditors

Ethics and the Audit Profession

Audit Responsibilities and Objectives

Nature and Type of Audit Evidence

Audit Planning

Considering Materiality and Audit Risk

Considering Internal Control

Implications of Information Technology for the Audit Process

Developing the Overall Audit Plan and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

Audit of the Inventory and Warehousing Cycle

Audit of the Payroll and Personnel Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Audit Completion

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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