Question 1

When the allowance for doubtful accounts is understated,bad debt expense is understated and net income is also understated.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is a factor that relates to incentives to misappropriate assets?

Accepted Answer

A)  Significant accounting estimates involving subjective judgments 
B)  Significant personal financial obligations 
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)  Significant personal financial obligations 
C)  Management's practice of making overly aggressive forecasts 
D)  High turnover of accounting, internal audit and information technology staff

Question 3

Auditors may expand other substantive procedures to address the heightened risks of fraud.

Accepted Answer

A) True 
 B)False

Question 4

Determine from the following the factor that would most likely elevate the auditor's concern about the risk of financial statement fraud.

Accepted Answer

A)  Company cannot borrow debt capital without restrictive covenants. 
B)  Company finds it difficult to sell equity capital for expansion. 
C)  Company has a significant portion of liquid assets on its balance sheet. 
D)  Company reports substantial net income but ever decreasing cash flow from operations. 
A)  Company cannot borrow debt capital without restrictive covenants. 
B)  Company finds it difficult to sell equity capital for expansion. 
C)  Company has a significant portion of liquid assets on its balance sheet. 
D)  Company reports substantial net income but ever decreasing cash flow from operations.

Question 5

"An attitude,character,or set of ethical values exist that allow management or employees to commit a dishonest act …." describes the opportunities condition included in the fraud triangle.

Accepted Answer

A) True 
 B)False

Question 6

Upon discovering information that indicates a material misstatement due to fraud,the auditor must assume that the misstatement is an isolated incident.

Accepted Answer

A) True 
 B)False

Question 7

List and briefly describe examples of risk factors for each condition of fraud for fraudulent financial reporting.

Accepted Answer

Incentives/Pressures: 1.Financial stabil

Question 8

When the auditor receives inconsistent responses from management and others within the organization,the auditor should obtain additional audit evidence to resolve the inconsistency.

Accepted Answer

A) True 
 B)False

Question 9

Management is responsible for:

Accepted Answer

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

Question 10

Fictitious revenue transactions have the same level of documentary evidence as legitimate transactions.

Accepted Answer

A) True 
 B)False

Question 11

The pressure to do "whatever it takes" to meet goals is one of the main reasons why financial statement fraud occurs.

Accepted Answer

A) True 
 B)False

Question 12

Auditors may identify conditions during fieldwork that change or support a judgment about the initial assessment of fraud risks.Which of the following is not a condition which should alert an auditor that the initial assessment should be changed?

Accepted Answer

A)  The subsidiary ledger agrees to the general ledger. 
B)  Discrepancies in the accounting records 
C)  Unusual relationships between the auditor and management 
D)  Missing or conflicting evidence 
A)  The subsidiary ledger agrees to the general ledger. 
B)  Discrepancies in the accounting records 
C)  Unusual relationships between the auditor and management 
D)  Missing or conflicting evidence

Question 13

When analyzing accounts for fraud risk:

Accepted Answer

A)  companies will generally attempt to overstate accounts payable and net income. 
B)  the inventory account is generally not susceptible to fraud since the auditor must verify the existence of the inventory. 
C)  payroll is rarely a significant risk for fraudulent financial reporting. 
D)  fixed assets are rarely stolen because of their large size. 
A)  companies will generally attempt to overstate accounts payable and net income. 
B)  the inventory account is generally not susceptible to fraud since the auditor must verify the existence of the inventory. 
C)  payroll is rarely a significant risk for fraudulent financial reporting. 
D)  fixed assets are rarely stolen because of their large size.

When the allowance for doubtful accounts is understated,bad debt expense is understated and net income is also understated.

Which of the following is a factor that relates to incentives to misappropriate assets?

Auditors may expand other substantive procedures to address the heightened risks of fraud.

Determine from the following the factor that would most likely elevate the auditor's concern about the risk of financial statement fraud.

"An attitude,character,or set of ethical values exist that allow management or employees to commit a dishonest act …." describes the opportunities condition included in the fraud triangle.

Upon discovering information that indicates a material misstatement due to fraud,the auditor must assume that the misstatement is an isolated incident.

List and briefly describe examples of risk factors for each condition of fraud for fraudulent financial reporting.

When the auditor receives inconsistent responses from management and others within the organization,the auditor should obtain additional audit evidence to resolve the inconsistency.

Management is responsible for:

Fictitious revenue transactions have the same level of documentary evidence as legitimate transactions.

The pressure to do "whatever it takes" to meet goals is one of the main reasons why financial statement fraud occurs.

Auditors may identify conditions during fieldwork that change or support a judgment about the initial assessment of fraud risks.Which of the following is not a condition which should alert an auditor that the initial assessment should be changed?

When analyzing accounts for fraud risk:

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

Filters

Exam 11: Considering the Risk of Fraud

When the allowance for doubtful accounts is understated,bad debt expense is understated and net income is also understated.

Which of the following is a factor that relates to incentives to misappropriate assets?

Auditors may expand other substantive procedures to address the heightened risks of fraud.

Determine from the following the factor that would most likely elevate the auditor's concern about the risk of financial statement fraud.

"An attitude,character,or set of ethical values exist that allow management or employees to commit a dishonest act …." describes the opportunities condition included in the fraud triangle.

Upon discovering information that indicates a material misstatement due to fraud,the auditor must assume that the misstatement is an isolated incident.

List and briefly describe examples of risk factors for each condition of fraud for fraudulent financial reporting.

When the auditor receives inconsistent responses from management and others within the organization,the auditor should obtain additional audit evidence to resolve the inconsistency.

Management is responsible for:

Fictitious revenue transactions have the same level of documentary evidence as legitimate transactions.

The pressure to do "whatever it takes" to meet goals is one of the main reasons why financial statement fraud occurs.

Auditors may identify conditions during fieldwork that change or support a judgment about the initial assessment of fraud risks.Which of the following is not a condition which should alert an auditor that the initial assessment should be changed?

When analyzing accounts for fraud risk:

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

Filters