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

Which of the following is not a specific responsibility of an audit committee as mandated by the NYSE?

The audit committee must be composed of outsiders such as the organization's attorney and audit partner.

Once the fraud risk assessment is complete in the planning stage,the auditor need not consider fraud further.

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

Corporate governance is a process by which the owners,but not the creditors,exert control and require accountability for the resources entrusted to the organization.

According to the PCAOB,the detection of material fraud is a reasonable expectation of users of audited financial statements.

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

Auditor's response to fraud risk factors The auditor assesses the identified fraud risks after taking into account an evaluation of the client's programs and controls.How might the auditor respond to the results of the assessment of higher fraud risk?

Professional skepticism involves such things as questioning and corroborating management responses to inquiries and determining the authenticity of documents.

Any major disagreement the auditor has with management should be discussed with the audit committee.

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

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

The most important lesson to be learned from The Great Salad Oil Swindle is that auditors can commit fraud by falsely including inventory that does not exist.

Which of the following items are registered audit firms not required to report to the audit committee?

The audit committee is a subcommittee of the board of directors comprised of independent outside directors.

According to COSO studies,the majority of the frauds took place at companies that were listed on the Over-The- Counter (OTC)market,rather than those listed on the NYSE or NASDAQ.

Management of companies should have the ability to hire and fire the external auditor.

According to the Sarbanes-Oxley Act,the audit committee must have at least 3 independent members who are financial experts.

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

How must an auditor address fraud in the planning stage?