Question 1

What is employee fraud?

Accepted Answer

Fraudulently taking money or other property from an employer. It usually involves falsifications of some kind such a lying, exceeding authority, violating an employer's policies, or falsifying documents.

Question 2

To whom should immaterial errors should be reported?

Accepted Answer

A)  No one. 
B)  The audit committee. 
C)  Senior management. 
D)  The manager at least one level above the people involved. 
A)  No one. 
B)  The audit committee. 
C)  Senior management. 
D)  The manager at least one level above the people involved. D

Question 3

To assess the risk of material misstatement at the financial statement level, the auditor needs a detailed knowledge of internal control components relevant to financial reporting.

Accepted Answer

A) True 
 B)False  True

Question 4

The first digit in a social insurance number ________.

Accepted Answer

A)  has no meaning 
B)  is related to the date of birth of the recipient 
C)  indicates the province or region where the number was issued 
D)  is sequentially numbered based on when the card was issued 
A)  has no meaning 
B)  is related to the date of birth of the recipient 
C)  indicates the province or region where the number was issued 
D)  is sequentially numbered based on when the card was issued

Question 5

If a supervisor sets a bad example by taking office supplies home for personal use, this affects which of the following factors that lead to fraud?

Accepted Answer

A)  Fraud incentive. 
B)  Fraud opportunity. 
C)  Fraud rationalization. 
D)  Fraud detection. 
A)  Fraud incentive. 
B)  Fraud opportunity. 
C)  Fraud rationalization. 
D)  Fraud detection.

Question 6

An organization's risk control frameworks are not very useful to auditors for assessing risks at the company level and for auditing controls over financial reporting.

Accepted Answer

A) True 
 B)False

Question 7

Knowledge of the characteristics of SIN numbers can be useful to auditors when checking personnel files and the validity of people on the payroll.

Accepted Answer

A) True 
 B)False

Question 8

A fraud detection tool that assesses a firm along the five dimensions of accrual quality, financial performance, nonfinancial measures, off-balance sheet activities, and market-based incentives is called the ________.

Accepted Answer

A)  Fraud Detector 
B)  Embezzlease 
C)  F-Score 
D)  Red Flagger 
A)  Fraud Detector 
B)  Embezzlease 
C)  F-Score 
D)  Red Flagger

Question 9

According to the Criteria of Control Guidance on Control, what are four values and preferences of senior management that can greatly influence an organization?

Accepted Answer

Values and preferences of senior managem

Question 10

Fraudulent financial reporting is a type of fraud perpetrated by management through exploitation of its authority.

Accepted Answer

A) True 
 B)False

Question 11

Define application controls and provide examples.

Accepted Answer

Application controls are viewed in terms

Question 12

Statistics on fraud show that ________.

Accepted Answer

A)  senior executives commit the highest number of frauds and the senior executives cause the highest losses due to fraud 
B)  employees below the level of senior executives commit the highest number of frauds and cause the highest losses due to fraud 
C)  senior executives commit the highest number of frauds and employees below the level of the senior executives cause the highest losses due to fraud 
D)  employees below the level of senior executives commit the highest number of frauds but the senior executives commit the highest-value frauds 
A)  senior executives commit the highest number of frauds and the senior executives cause the highest losses due to fraud 
B)  employees below the level of senior executives commit the highest number of frauds and cause the highest losses due to fraud 
C)  senior executives commit the highest number of frauds and employees below the level of the senior executives cause the highest losses due to fraud 
D)  employees below the level of senior executives commit the highest number of frauds but the senior executives commit the highest-value frauds

Question 13

Fraudulent financial reporting is an intentional act that results in materially misleading financial statements.

Accepted Answer

A) True 
 B)False

Question 14

"Thinking like a crook" is central to ________.

Accepted Answer

A)  embezzlement 
B)  fraud awareness auditing 
C)  rationalization 
D)  defalcation 
A)  embezzlement 
B)  fraud awareness auditing 
C)  rationalization 
D)  defalcation

Question 15

Intentionally overstating revenues and assets or understating expenses and liabilities is known as ________.

Accepted Answer

A)  creative accounting 
B)  dangling 
C)  employee fraud 
D)  defalcation 
A)  creative accounting 
B)  dangling 
C)  employee fraud 
D)  defalcation

Question 16

If an employee or non-employee wrongfully takes money or property entrusted to their care, custody, and control, this is known as ________.

Accepted Answer

A)  white-collar crime 
B)  embezzlement 
C)  fraud 
D)  irregularity 
A)  white-collar crime 
B)  embezzlement 
C)  fraud 
D)  irregularity

Question 17

Since management is most familiar with an organization, they should sit on the board of directors and advise those charged with governance of the organization.

Accepted Answer

A) True 
 B)False

Question 18

Lack of integrity is the most important factor affecting the risk of management fraud.

Accepted Answer

A) True 
 B)False

Question 19

An auditor can broadly define controls as ________.

Accepted Answer

A)  those elements of an organization that, taken together, support people in achieving an organization's objectives 
B)  those systems, processes, and procedures that prevent fraud 
C)  key performance indicators employed by management to measure an organization's success 
D)  the structure and culture of an organization which helps to eliminate risk 
A)  those elements of an organization that, taken together, support people in achieving an organization's objectives 
B)  those systems, processes, and procedures that prevent fraud 
C)  key performance indicators employed by management to measure an organization's success 
D)  the structure and culture of an organization which helps to eliminate risk

Question 20

External auditors are required to report illegal acts to the appropriate governmental agency within 30 days of finding them.

Accepted Answer

A) True 
 B)False

Exam 7: Internal Control Over Financial Reporting

What is employee fraud?

To whom should immaterial errors should be reported?

To assess the risk of material misstatement at the financial statement level, the auditor needs a detailed knowledge of internal control components relevant to financial reporting.

The first digit in a social insurance number ________.

If a supervisor sets a bad example by taking office supplies home for personal use, this affects which of the following factors that lead to fraud?

An organization's risk control frameworks are not very useful to auditors for assessing risks at the company level and for auditing controls over financial reporting.

Knowledge of the characteristics of SIN numbers can be useful to auditors when checking personnel files and the validity of people on the payroll.

A fraud detection tool that assesses a firm along the five dimensions of accrual quality, financial performance, nonfinancial measures, off-balance sheet activities, and market-based incentives is called the ________.

According to the Criteria of Control Guidance on Control, what are four values and preferences of senior management that can greatly influence an organization?

Fraudulent financial reporting is a type of fraud perpetrated by management through exploitation of its authority.

Define application controls and provide examples.

Statistics on fraud show that ________.

Fraudulent financial reporting is an intentional act that results in materially misleading financial statements.

"Thinking like a crook" is central to ________.

Intentionally overstating revenues and assets or understating expenses and liabilities is known as ________.

If an employee or non-employee wrongfully takes money or property entrusted to their care, custody, and control, this is known as ________.

Since management is most familiar with an organization, they should sit on the board of directors and advise those charged with governance of the organization.

Lack of integrity is the most important factor affecting the risk of management fraud.

An auditor can broadly define controls as ________.

External auditors are required to report illegal acts to the appropriate governmental agency within 30 days of finding them.

Introduction to Auditing

Auditors Professional Roles and Responsibilities

Auditors Ethical and Legal Responsibilities

Reports on Audited Financial Statements

Preliminary Audit Planning: Understanding the Auditees Business

Assessing Risks in an Audit Engagement

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

The Revenues, Receivables, and Receipts Process and Cash Account Balance

The Purchases, Payables, and Payments Process

Payroll and Production Processes

The Finance and Investment Process

Completing the Audit Work

Applying Professional Judgment to Form the Audit Opinion and Issue Theaudit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

Part I the Audit of Accounting Estimates: Basic Material Relating to Accountingestimates

Legal Liability Cases

Other Professional Accounting Services and Reports, Including Fraud

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