Question 1

Opportunity is one element of the fraud triangle.

Accepted Answer

A) True 
 B)False

Question 2

Under the NYSE corporate governance guidelines,which of the following committees should a corporation's board of directors establish?

Accepted Answer

A) Nominating/corporate governance committee. 
B) Audit committee. 
C) Compensation committee 
D) All of the above. 
A) Nominating/corporate governance committee. 
B) Audit committee. 
C) Compensation committee 
D) All of the above.

Question 3

According to professional audit standards,the audit team should assemble early in the planning stages of an audit to conduct a fraud "brainstorming" meeting in order to determine the types of fraud that may occur with the client.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements about the Bernie Madoff Ponzi scheme is false?

Accepted Answer

A) Madoff took advantage of his unique ties to the investment community (he was the former Chair of the NASDAQ)to create trust and encourage further investments. 
B) Madoff began perpetrating the fraud shortly before passage of the Sarbanes-Oxley Act,and the provisions of that Act ultimately led to discovery of the fraud. 
C) Madoff was sentenced to 150 years in prison. 
D) The estimated amount missing from client accounts,including fabricated gains,was almost $65 billion. 
A) Madoff took advantage of his unique ties to the investment community (he was the former Chair of the NASDAQ)to create trust and encourage further investments. 
B) Madoff began perpetrating the fraud shortly before passage of the Sarbanes-Oxley Act,and the provisions of that Act ultimately led to discovery of the fraud. 
C) Madoff was sentenced to 150 years in prison. 
D) The estimated amount missing from client accounts,including fabricated gains,was almost $65 billion.

Question 5

Fraud is an intentional act involving the use of deception that results in a misstatement of the financial statements.

Accepted Answer

A) True 
 B)False

Question 6

Professional skepticism is required on audit engagements that have a high risk of fraud but can be disregarded for all other engagements.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following creates an opportunity for fraud to be committed in an organization?

Accepted Answer

A) Management demands financial success. 
B) Poor internal control. 
C) Commitments tied to debt covenants. 
D) Management is aggressive in its application of accounting rules. 
A) Management demands financial success. 
B) Poor internal control. 
C) Commitments tied to debt covenants. 
D) Management is aggressive in its application of accounting rules.

Question 8

Which of the following statements about fraud or fraud detection is true?

Accepted Answer

A) Management may physically alter evidence to perpetrate and conceal the fraud. 
B) Fraudulent financial reporting is generally not material enough to consider. 
C) Journal entries will supply evidence necessary to detect fraud. 
D) The advent of new technology prevents fraud,thereby leading to less fraud over time. 
A) Management may physically alter evidence to perpetrate and conceal the fraud. 
B) Fraudulent financial reporting is generally not material enough to consider. 
C) Journal entries will supply evidence necessary to detect fraud. 
D) The advent of new technology prevents fraud,thereby leading to less fraud over time.

Question 9

The onslaught of fraud in financial statements over the past two decades has been the first of its kind in history.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is not one of management's responsibilities?

Accepted Answer

A) Developing financial and other reports that meet the needs of users. 
B) Engaging a qualified auditor. 
C) Implementing effective internal controls. 
D) Implementing an effective ethical environment. 
A) Developing financial and other reports that meet the needs of users. 
B) Engaging a qualified auditor. 
C) Implementing effective internal controls. 
D) Implementing an effective ethical environment.

Question 11

The auditor has a responsibility to design the audit to provide absolute assurance of detecting material fraud.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is a specific governance responsibility of the board of directors of a public corporation?

Accepted Answer

A) Managing and reviewing operations. 
B) Approving corporate strategy. 
C) Implementing effective internal controls. 
D) Selecting the external audit firm. 
A) Managing and reviewing operations. 
B) Approving corporate strategy. 
C) Implementing effective internal controls. 
D) Selecting the external audit firm.

Question 13

The auditor should not consider that fraud is present in revenue accounts because revenue recognition does not typically play a role in fraudulent financial reporting.

Accepted Answer

A) True 
 B)False

Question 14

When the risk of fraud is high in financial statements,the auditor should assign less experienced auditors to the engagement.

Accepted Answer

A) True 
 B)False

Question 15

How did the Sarbanes-Oxley Act strengthen auditor independence?

Accepted Answer

A) By requiring auditors to provide reports in accordance with the Foreign Corrupt Practices Act. 
B) By requiring auditors to report the nature of any auditor-client disagreements to the SEC. 
C) By requiring the lead partner to rotate off the audit engagement at least every five years. 
D) By requiring a different audit firm from the one that performs the audit to prepare the client's tax return. 
A) By requiring auditors to provide reports in accordance with the Foreign Corrupt Practices Act. 
B) By requiring auditors to report the nature of any auditor-client disagreements to the SEC. 
C) By requiring the lead partner to rotate off the audit engagement at least every five years. 
D) By requiring a different audit firm from the one that performs the audit to prepare the client's tax return.

Question 16

Pressure upon management to manipulate financial information is a common characteristic in fraud cases.

Accepted Answer

A) True 
 B)False

Question 17

According to the Sarbanes-Oxley Act,which of the following items is the independent auditor required to report to the audit committee?

Accepted Answer

A) Materiality limits for audit testing. 
B) Critical accounting policies and practices. 
C) The extent of audit testing in high-risk accounts. 
D) A list of probable fraud errors identified in audit planning. 
A) Materiality limits for audit testing. 
B) Critical accounting policies and practices. 
C) The extent of audit testing in high-risk accounts. 
D) A list of probable fraud errors identified in audit planning.

Question 18

Consideration of fraud in financial statement audits is a relatively new concept derived originally from the Sarbanes- Oxley Act.

Accepted Answer

A) True 
 B)False

Question 19

What should auditors and others involved in the financial reporting process do to mitigate the risk of fraudulent financial reporting?

Accepted Answer

A) Acknowledge that there needs to exist a strong,highly ethical tone at the top of an organization that permeates the corporate culture,including an effective fraud risk management program. 
B) Continually exercise professional skepticism. 
C) Remember that strong communication among those involved in the financial reporting process is critical. 
D) All of the above. 
A) Acknowledge that there needs to exist a strong,highly ethical tone at the top of an organization that permeates the corporate culture,including an effective fraud risk management program. 
B) Continually exercise professional skepticism. 
C) Remember that strong communication among those involved in the financial reporting process is critical. 
D) All of the above.

Opportunity is one element of the fraud triangle.

Under the NYSE corporate governance guidelines,which of the following committees should a corporation's board of directors establish?

According to professional audit standards,the audit team should assemble early in the planning stages of an audit to conduct a fraud "brainstorming" meeting in order to determine the types of fraud that may occur with the client.

Which of the following statements about the Bernie Madoff Ponzi scheme is false?

Fraud is an intentional act involving the use of deception that results in a misstatement of the financial statements.

Professional skepticism is required on audit engagements that have a high risk of fraud but can be disregarded for all other engagements.

Which of the following creates an opportunity for fraud to be committed in an organization?

Which of the following statements about fraud or fraud detection is true?

The onslaught of fraud in financial statements over the past two decades has been the first of its kind in history.

Which of the following is not one of management's responsibilities?

The auditor has a responsibility to design the audit to provide absolute assurance of detecting material fraud.

Which of the following is a specific governance responsibility of the board of directors of a public corporation?

The auditor should not consider that fraud is present in revenue accounts because revenue recognition does not typically play a role in fraudulent financial reporting.

When the risk of fraud is high in financial statements,the auditor should assign less experienced auditors to the engagement.

How did the Sarbanes-Oxley Act strengthen auditor independence?

Pressure upon management to manipulate financial information is a common characteristic in fraud cases.

According to the Sarbanes-Oxley Act,which of the following items is the independent auditor required to report to the audit committee?

Consideration of fraud in financial statement audits is a relatively new concept derived originally from the Sarbanes- Oxley Act.

What should auditors and others involved in the financial reporting process do to mitigate the risk of fraudulent financial reporting?

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

Opportunity is one element of the fraud triangle.

Under the NYSE corporate governance guidelines,which of the following committees should a corporation's board of directors establish?

According to professional audit standards,the audit team should assemble early in the planning stages of an audit to conduct a fraud "brainstorming" meeting in order to determine the types of fraud that may occur with the client.

Which of the following statements about the Bernie Madoff Ponzi scheme is false?

Fraud is an intentional act involving the use of deception that results in a misstatement of the financial statements.

Professional skepticism is required on audit engagements that have a high risk of fraud but can be disregarded for all other engagements.

Which of the following creates an opportunity for fraud to be committed in an organization?

Which of the following statements about fraud or fraud detection is true?

The onslaught of fraud in financial statements over the past two decades has been the first of its kind in history.

Which of the following is not one of management's responsibilities?

The auditor has a responsibility to design the audit to provide absolute assurance of detecting material fraud.

Which of the following is a specific governance responsibility of the board of directors of a public corporation?

The auditor should not consider that fraud is present in revenue accounts because revenue recognition does not typically play a role in fraudulent financial reporting.

When the risk of fraud is high in financial statements,the auditor should assign less experienced auditors to the engagement.

How did the Sarbanes-Oxley Act strengthen auditor independence?

Pressure upon management to manipulate financial information is a common characteristic in fraud cases.

According to the Sarbanes-Oxley Act,which of the following items is the independent auditor required to report to the audit committee?

Consideration of fraud in financial statement audits is a relatively new concept derived originally from the Sarbanes- Oxley Act.

What should auditors and others involved in the financial reporting process do to mitigate the risk of fraudulent financial reporting?

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