Question 1

What is meant by the term "professional skepticism?"

Accepted Answer

Ignoring the traditional assumption of m

Question 2

In an organization, who are the largest frauds typically committed by?

Accepted Answer

People who hold high executive

Question 3

Briefly describe the three factors that increase the probability of fraud.

Accepted Answer

Motive, opportunity, and lack of integri

Question 4

What is the most important factor affecting the risk of management fraud?

Accepted Answer

A)  Lack of integrity. 
B)  Lack of internal controls 
C)  Lack of board of director involvement in organization. 
D)  Lack of audited financial statements. 
A)  Lack of integrity. 
B)  Lack of internal controls 
C)  Lack of board of director involvement in organization. 
D)  Lack of audited financial statements.

Question 5

Provide examples of telltale hints that are indications of a cover-up of fraudulent activity in the accounting records.

Accepted Answer

Missing documents, cash shortages and ov

Question 6

Which of the following is normally considered an accounting estimate?

Accepted Answer

A)  Credit sales. 
B)  Amortization of capital assets. 
C)  Repairs and maintenance expense. 
D)  Audit fees. 
A)  Credit sales. 
B)  Amortization of capital assets. 
C)  Repairs and maintenance expense. 
D)  Audit fees.

Question 7

A good reason for involving fraud auditors in the planning of a regular audit of financial statements is _______.

Accepted Answer

A)  when there are many fraud risk factors 
B)  when the audit committee authorizes further investigation 
C)  it makes the client aware of how seriously the auditor takes its fraud detection responsibility 
D)  it improves the documentation standards of the financial statement audit 
A)  when there are many fraud risk factors 
B)  when the audit committee authorizes further investigation 
C)  it makes the client aware of how seriously the auditor takes its fraud detection responsibility 
D)  it improves the documentation standards of the financial statement audit

Question 8

Terrance was a model, longstanding employee who liked his job, but he felt that he was underpaid for what he contributed to the organization. As a result, he decided to start taking office supplies home to "even the score." This is an example of ________.

Accepted Answer

A)  fraud opportunity 
B)  fraud incentive 
C)  fraud rationalization 
D)  misstatement 
A)  fraud opportunity 
B)  fraud incentive 
C)  fraud rationalization 
D)  misstatement

Question 9

What is the connection between communication and internal control?

Accepted Answer

Communication involves providing an unde

Question 10

Company-level controls can have a big impact on a company's financial reporting.

Accepted Answer

A) True 
 B)False

Question 11

An F-Score can predict 60% of misstatements in financial statements that eventually come to light as restatements.

Accepted Answer

A) True 
 B)False

Question 12

Auditors have taken on increased responsibility for detecting fraud and other illegal acts in recent years.

Accepted Answer

A) True 
 B)False

Question 13

CAS 240 requires auditors to ignore the traditional assumption of management's honesty.

Accepted Answer

A) True 
 B)False

Question 14

For each of the following statements numbered 1 through 5, match the statement to the term (A through D) that it best describes and place the identifying letter in the space provided.
A. Embezzlement or defalcation
B. Management fraud
C. Errors
D. Employee fraud
____ 1. A bookkeeper inadvertently transposed an amount in a journal entry for amortization.
____ 2. An employee in a supermarket takes home bags of fresh fruit every day without paying for them.
____ 3. Embezzlement by pencil or computer.
____ 4. A type of fraud in which employees steal money or property that has been entrusted to their care.
____ 5. The controller changed the journal entry for recording estimated bad debt expense to a smaller amount to hide the poor results from extending credit to high risk customers. This action increased recorded income by a material amount.

Accepted Answer

1. C
2. A

Question 15

Over 90% of frauds are discovered by external or internal auditors.

Accepted Answer

A) True 
 B)False

Question 16

An auditor who discovers that client employees have committed an illegal act with material consequences on the financial statements is most likely to seek legal advice and consider withdrawing from the engagement if ________.

Accepted Answer

A)  the illegal act is a violation of generally accepted accounting principles 
B)  the client does not take appropriate action after being informed about the illegal act 
C)  the illegal act was committed during a prior year that was not audited 
D)  the auditor has already assessed control risk at the maximum level 
A)  the illegal act is a violation of generally accepted accounting principles 
B)  the client does not take appropriate action after being informed about the illegal act 
C)  the illegal act was committed during a prior year that was not audited 
D)  the auditor has already assessed control risk at the maximum level

Question 17

How should an auditor handle illegal acts by auditees?

Accepted Answer

CAS 250 acknowledges that illegal acts m

Question 18

A fraud that involves the improper recognition of assets is known as a ________.

Accepted Answer

A)  red flag 
B)  dangling debit 
C)  dangling credit 
D)  profit squeeze 
A)  red flag 
B)  dangling debit 
C)  dangling credit 
D)  profit squeeze

Question 19

When an auditor becomes aware of a possible illegal act by a client, the auditor should obtain an understanding of the nature of the act in order to ________.

Accepted Answer

A)  evaluate the effect on the financial statements 
B)  determine the reliability of management's representations 
C)  consider whether other similar acts may have occurred 
D)  recommend remedial actions to the audit committee 
A)  evaluate the effect on the financial statements 
B)  determine the reliability of management's representations 
C)  consider whether other similar acts may have occurred 
D)  recommend remedial actions to the audit committee

Question 20

The possibility that fraud has resulted in intentional misstatement in the financial statements is known as ________.

Accepted Answer

A)  audit risk 
B)  control risk 
C)  detection risk 
D)  fraud risk 
A)  audit risk 
B)  control risk 
C)  detection risk 
D)  fraud risk

What is meant by the term "professional skepticism?"

In an organization, who are the largest frauds typically committed by?

Briefly describe the three factors that increase the probability of fraud.

What is the most important factor affecting the risk of management fraud?

Provide examples of telltale hints that are indications of a cover-up of fraudulent activity in the accounting records.

Which of the following is normally considered an accounting estimate?

A good reason for involving fraud auditors in the planning of a regular audit of financial statements is _______.

Terrance was a model, longstanding employee who liked his job, but he felt that he was underpaid for what he contributed to the organization. As a result, he decided to start taking office supplies home to "even the score." This is an example of ________.

What is the connection between communication and internal control?

Company-level controls can have a big impact on a company's financial reporting.

An F-Score can predict 60% of misstatements in financial statements that eventually come to light as restatements.

Auditors have taken on increased responsibility for detecting fraud and other illegal acts in recent years.

CAS 240 requires auditors to ignore the traditional assumption of management's honesty.

Over 90% of frauds are discovered by external or internal auditors.

An auditor who discovers that client employees have committed an illegal act with material consequences on the financial statements is most likely to seek legal advice and consider withdrawing from the engagement if ________.

How should an auditor handle illegal acts by auditees?

A fraud that involves the improper recognition of assets is known as a ________.

When an auditor becomes aware of a possible illegal act by a client, the auditor should obtain an understanding of the nature of the act in order to ________.

The possibility that fraud has resulted in intentional misstatement in the financial statements is known as ________.

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

Filters

Exam 7: Internal Control Over Financial Reporting

What is meant by the term "professional skepticism?"

In an organization, who are the largest frauds typically committed by?

Briefly describe the three factors that increase the probability of fraud.

What is the most important factor affecting the risk of management fraud?

Provide examples of telltale hints that are indications of a cover-up of fraudulent activity in the accounting records.

Which of the following is normally considered an accounting estimate?

A good reason for involving fraud auditors in the planning of a regular audit of financial statements is _______.

Terrance was a model, longstanding employee who liked his job, but he felt that he was underpaid for what he contributed to the organization. As a result, he decided to start taking office supplies home to "even the score." This is an example of ________.

What is the connection between communication and internal control?

Company-level controls can have a big impact on a company's financial reporting.

An F-Score can predict 60% of misstatements in financial statements that eventually come to light as restatements.

Auditors have taken on increased responsibility for detecting fraud and other illegal acts in recent years.

CAS 240 requires auditors to ignore the traditional assumption of management's honesty.

Over 90% of frauds are discovered by external or internal auditors.

An auditor who discovers that client employees have committed an illegal act with material consequences on the financial statements is most likely to seek legal advice and consider withdrawing from the engagement if ________.

How should an auditor handle illegal acts by auditees?

A fraud that involves the improper recognition of assets is known as a ________.

When an auditor becomes aware of a possible illegal act by a client, the auditor should obtain an understanding of the nature of the act in order to ________.

The possibility that fraud has resulted in intentional misstatement in the financial statements is known as ________.

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

Filters