Question 1

Which of the following is an example of fraud?

Accepted Answer

A) A mistake in processing accounting data. 
B) An incorrect accounting estimate arising from misinterpretation of facts. 
C) Misappropriation of an asset. 
D) A mistake in the application of accounting principles. 
A) A mistake in processing accounting data. 
B) An incorrect accounting estimate arising from misinterpretation of facts. 
C) Misappropriation of an asset. 
D) A mistake in the application of accounting principles.

Question 2

Which of the following statements is true concerning the fraud risk model?

Accepted Answer

A) Assessing incentive is the first phase of the model. 
B) The fraud risk model should be reviewed with the audit team. 
C) The fraud risk model should be modified based on a review of internal controls. 
D) Auditors do not use a fraud risk model. 
A) Assessing incentive is the first phase of the model. 
B) The fraud risk model should be reviewed with the audit team. 
C) The fraud risk model should be modified based on a review of internal controls. 
D) Auditors do not use a fraud risk model.

Question 3

The auditor must perform a brainstorming session with client management in order to plan the procedures to be performed.

Accepted Answer

A) True 
 B)False

Question 4

How frequently does the PCAOB inspect registered accounting firms that audit 100 or more issuers?

Accepted Answer

A) Annually. 
B) Every two years. 
C) Every three years 
D) Every five years. 
A) Annually. 
B) Every two years. 
C) Every three years 
D) Every five years.

Question 5

What type of fraud occurs when the deposits of current investors are used to pay returns on the deposits of previous investors with no real investment happening?

Accepted Answer

A) Ponzi Scheme. 
B) Skimming. 
C) Channel Stuffing. 
D) Off-Balance Sheet Fraud. 
A) Ponzi Scheme. 
B) Skimming. 
C) Channel Stuffing. 
D) Off-Balance Sheet Fraud.

Question 6

Auditors are responsible to detect fraud even if it has an immaterial effect on the financial statements.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is a common incentive or condition that increases the likelihood for fraudulent financial reporting?

Accepted Answer

A) Ineffective segregation of assets. 
B) Significant related party transactions. 
C) Management bonuses based on reported earnings. 
D) Access to undeposited cash. 
A) Ineffective segregation of assets. 
B) Significant related party transactions. 
C) Management bonuses based on reported earnings. 
D) Access to undeposited cash.

Question 8

Effective 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.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following are management responsibilities under the Sarbanes-Oxley Act of 2002?

Accepted Answer

A) Certify in reports filed with the SEC that the report does not contain untrue statements of material facts. 
B) Disclose material deficiencies in controls to the audit committee. 
C) Design internal controls. 
D) Certify in reports filed with the SEC that the company's internal controls are effective in preventing fraud. 
A) Certify in reports filed with the SEC that the report does not contain untrue statements of material facts. 
B) Disclose material deficiencies in controls to the audit committee. 
C) Design internal controls. 
D) Certify in reports filed with the SEC that the company's internal controls are effective in preventing fraud.

Question 10

Implementing an effective ethical environment is primarily the responsibility of the audit committee of the board of directors.

Accepted Answer

A) True 
 B)False

Question 11

An example of fraudulent financial reporting is the CFO intentionally overstating sales to boost profits.

Accepted Answer

A) True 
 B)False

Question 12

Which action was a key element in the WorldCom fraud case?

Accepted Answer

A) Recording bartered exchange transactions as revenue. 
B) Overstating cash by falsely recording cash held at major banks. 
C) Recognizing revenue on the sale of impaired assets. 
D) Concealing large losses related to securities investments. 
A) Recording bartered exchange transactions as revenue. 
B) Overstating cash by falsely recording cash held at major banks. 
C) Recognizing revenue on the sale of impaired assets. 
D) Concealing large losses related to securities investments.

Question 13

Formulating corporate strategy and risk management policy is primarily the responsibility of the board of directors.

Accepted Answer

A) True 
 B)False

Question 14

The fraud triangle requires the auditor to actively consider and assess the risk of fraud for clients and their financial statements.

Accepted Answer

A) True 
 B)False

Question 15

The auditor is responsible for actively considering fraud risks in order to obtain reasonable assurance that the financial statements are free of material fraud.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following frauds is most common?

Accepted Answer

A) Chief financial officer's misappropriation of funds. 
B) Misapplication of revenue recognition principles. 
C) Management's theft of cash held in reserve accounts. 
D) Over-recording expenses related to stock options. 
A) Chief financial officer's misappropriation of funds. 
B) Misapplication of revenue recognition principles. 
C) Management's theft of cash held in reserve accounts. 
D) Over-recording expenses related to stock options.

Question 17

Which of the following best represents fraud related to financial reporting?

Accepted Answer

A) The transfer agent issues 40,000 shares of the company's stock to a friend without authorization by the board of directors. 
B) The controller of the company decreases warranty expense by $3 million because the company will otherwise miss analysts' expectations this quarter. 
C) The in-house attorney receives payments from the French government for negotiating the development of a new plant in Paris. 
D) The accounts receivable clerk covers up the theft of cash receipts by writing off older receivables without authorization. 
A) The transfer agent issues 40,000 shares of the company's stock to a friend without authorization by the board of directors. 
B) The controller of the company decreases warranty expense by $3 million because the company will otherwise miss analysts' expectations this quarter. 
C) The in-house attorney receives payments from the French government for negotiating the development of a new plant in Paris. 
D) The accounts receivable clerk covers up the theft of cash receipts by writing off older receivables without authorization.

Question 18

A board of directors that is actively involved in monitoring management mitigates opportunities to commit fraud.

Accepted Answer

A) True 
 B)False

Question 19

Audit Committee Responsibilities Describe the responsibilities of audit committees,and list at least four responsibilities that the NYSE has mandated for audit committees.

Accepted Answer

Section 301 of the Sarbanes-Oxley Act ou

Question 20

Management compensation that is tied to profits may create incentives to commit fraud.

Accepted Answer

A) True 
 B)False

Which of the following is an example of fraud?

Which of the following statements is true concerning the fraud risk model?

The auditor must perform a brainstorming session with client management in order to plan the procedures to be performed.

How frequently does the PCAOB inspect registered accounting firms that audit 100 or more issuers?

What type of fraud occurs when the deposits of current investors are used to pay returns on the deposits of previous investors with no real investment happening?

Auditors are responsible to detect fraud even if it has an immaterial effect on the financial statements.

Which of the following is a common incentive or condition that increases the likelihood for fraudulent financial reporting?

Effective 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.

Which of the following are management responsibilities under the Sarbanes-Oxley Act of 2002?

Implementing an effective ethical environment is primarily the responsibility of the audit committee of the board of directors.

An example of fraudulent financial reporting is the CFO intentionally overstating sales to boost profits.

Which action was a key element in the WorldCom fraud case?

Formulating corporate strategy and risk management policy is primarily the responsibility of the board of directors.

The fraud triangle requires the auditor to actively consider and assess the risk of fraud for clients and their financial statements.

The auditor is responsible for actively considering fraud risks in order to obtain reasonable assurance that the financial statements are free of material fraud.

Which of the following frauds is most common?

Which of the following best represents fraud related to financial reporting?

A board of directors that is actively involved in monitoring management mitigates opportunities to commit fraud.

Audit Committee Responsibilities Describe the responsibilities of audit committees,and list at least four responsibilities that the NYSE has mandated for audit committees.

Management compensation that is tied to profits may create incentives to commit fraud.

Quality Auditing: Why It Matters

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

Professional Legal Liability

Professional Auditing Standards and the Audit Opinion Formulation Process

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 Long-Term Liabilities and Stockholders Equity Transactions

Completing a Quality Audit

Audit Reports

Filters

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

Which of the following is an example of fraud?

Which of the following statements is true concerning the fraud risk model?

The auditor must perform a brainstorming session with client management in order to plan the procedures to be performed.

How frequently does the PCAOB inspect registered accounting firms that audit 100 or more issuers?

What type of fraud occurs when the deposits of current investors are used to pay returns on the deposits of previous investors with no real investment happening?

Auditors are responsible to detect fraud even if it has an immaterial effect on the financial statements.

Which of the following is a common incentive or condition that increases the likelihood for fraudulent financial reporting?

Effective 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.

Which of the following are management responsibilities under the Sarbanes-Oxley Act of 2002?

Implementing an effective ethical environment is primarily the responsibility of the audit committee of the board of directors.

An example of fraudulent financial reporting is the CFO intentionally overstating sales to boost profits.

Which action was a key element in the WorldCom fraud case?

Formulating corporate strategy and risk management policy is primarily the responsibility of the board of directors.

The fraud triangle requires the auditor to actively consider and assess the risk of fraud for clients and their financial statements.

The auditor is responsible for actively considering fraud risks in order to obtain reasonable assurance that the financial statements are free of material fraud.

Which of the following frauds is most common?

Which of the following best represents fraud related to financial reporting?

A board of directors that is actively involved in monitoring management mitigates opportunities to commit fraud.

Audit Committee Responsibilities Describe the responsibilities of audit committees,and list at least four responsibilities that the NYSE has mandated for audit committees.

Management compensation that is tied to profits may create incentives to commit fraud.

Quality Auditing: Why It Matters

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

Professional Legal Liability

Professional Auditing Standards and the Audit Opinion Formulation Process

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 Long-Term Liabilities and Stockholders Equity Transactions

Completing a Quality Audit

Audit Reports

Filters