Question 1

In which ways can management prepare fraudulent financial statements?

Accepted Answer

A) they can steal cash 
B) they can intentionally include events,transactions,or other significant information 
C) they can intentionally misapply accounting principles 
D) they can arrange for control activities to be improperly monitored 
A) they can steal cash 
B) they can intentionally include events,transactions,or other significant information 
C) they can intentionally misapply accounting principles 
D) they can arrange for control activities to be improperly monitored

Question 2

Audit documentation

Accepted Answer

A) is referred to as working papers or workpapers 
B) includes a record of the audit procedures attempted 
C) includes a record of the audit file obtained 
D) includes a record of the assumptions reached by the auditor from a review of the evidence 
E) may be recorded on paper or in electronic form
F)both A and C
G)both A and E 
A) is referred to as working papers or workpapers 
B) includes a record of the audit procedures attempted 
C) includes a record of the audit file obtained 
D) includes a record of the assumptions reached by the auditor from a review of the evidence 
E) may be recorded on paper or in electronic form
F)both A and C
G)both A and E

Question 3

The relationship between risk and the extent of testing is

Accepted Answer

A) As the risk of material misstatement increases,the auditor increases the extent of an audit procedure 
B) As the risk of material misstatement decreases,the auditor decreases the extent of substantive audit procedures and increases internal control testing 
C) As the risk of material misstatement increases,the auditor decreases internal control testing and increases the extent of substantive audit procedures 
D) The auditor may use computer-assisted audit techniques to test an entire population rather than take a sample as the risk of material misstatement increases 
E) The auditor is required to use computer-assisted audit techniques to test an entire population rather than take a sample as the risk of material misstatement increases
F)both A and B
G)both A and D 
A) As the risk of material misstatement increases,the auditor increases the extent of an audit procedure 
B) As the risk of material misstatement decreases,the auditor decreases the extent of substantive audit procedures and increases internal control testing 
C) As the risk of material misstatement increases,the auditor decreases internal control testing and increases the extent of substantive audit procedures 
D) The auditor may use computer-assisted audit techniques to test an entire population rather than take a sample as the risk of material misstatement increases 
E) The auditor is required to use computer-assisted audit techniques to test an entire population rather than take a sample as the risk of material misstatement increases
F)both A and B
G)both A and D

Question 4

The "appropriateness" of audit evidence is

Accepted Answer

A) a measure of the quantity of evidence needed 
B) a measure of the quality of audit evidence needed 
C) a measure of the relevance of the evidence needed 
D) a measure of the reliability of the evidence 
A) a measure of the quantity of evidence needed 
B) a measure of the quality of audit evidence needed 
C) a measure of the relevance of the evidence needed 
D) a measure of the reliability of the evidence

Question 5

Significant findings are to be documented by the auditor,including actions taken to address them and the basis for the final conclusion reached.Findings that might be significant include

Accepted Answer

A) accounting for complex or unusual transactions or accounting estimates or uncertainties 
B) results of audit procedures indicating that the financial statements or disclosure are not misstated or the need for an auditor to revise his previous assessment of the risk of misstatement 
C) circumstances that made it relatively easy for the auditor to apply auditing procedures 
D) findings that could result in modifications to management's report 
E) adjustments that the auditor has proposed to the financial statements
F)both A and E
G)both B and D
H)both D and E 
A) accounting for complex or unusual transactions or accounting estimates or uncertainties 
B) results of audit procedures indicating that the financial statements or disclosure are not misstated or the need for an auditor to revise his previous assessment of the risk of misstatement 
C) circumstances that made it relatively easy for the auditor to apply auditing procedures 
D) findings that could result in modifications to management's report 
E) adjustments that the auditor has proposed to the financial statements
F)both A and E
G)both B and D
H)both D and E

Question 6

The higher the risk of material misstatement,the more likely the auditor is to

Accepted Answer

A) gather more relevant and reliable evidence 
B) perform substantive tests at an interim period 
C) increase the extent of control testing 
D) keep the risk of misstatement to an acceptable low level 
A) gather more relevant and reliable evidence 
B) perform substantive tests at an interim period 
C) increase the extent of control testing 
D) keep the risk of misstatement to an acceptable low level

Question 7

The auditor is required to document his response to the assessed risk of material misstatement.This documentation should include

Accepted Answer

A) the results of audit procedures,including the analytical procedures designed to address the risk of management override of internal controls 
B) the overall response to the assessed risk of material misstatement due to fraud at the financial statement level and the nature,timing,and extent of audit procedures at the assertion level and a linkage between the audit procedures and the assessed risk of material misstatement 
C) other conditions and analytical procedures that cause the auditor to believe that additional auditing procedures were appropriate to address the risk of material misstatement due to fraud 
D) the significant decisions during the discussion among management regarding the susceptibility of the company's financial statements to material misstatement due to fraud 
E) the identified and assessed risks of material misstatement at both the financial statement level,and the procedures performed to obtain the information
F)both A and B
G)both B and C
H)both C and D 
A) the results of audit procedures,including the analytical procedures designed to address the risk of management override of internal controls 
B) the overall response to the assessed risk of material misstatement due to fraud at the financial statement level and the nature,timing,and extent of audit procedures at the assertion level and a linkage between the audit procedures and the assessed risk of material misstatement 
C) other conditions and analytical procedures that cause the auditor to believe that additional auditing procedures were appropriate to address the risk of material misstatement due to fraud 
D) the significant decisions during the discussion among management regarding the susceptibility of the company's financial statements to material misstatement due to fraud 
E) the identified and assessed risks of material misstatement at both the financial statement level,and the procedures performed to obtain the information
F)both A and B
G)both B and C
H)both C and D

Question 8

The higher the risk of material misstatement,the more likely the auditor is to

Accepted Answer

A) gather more relevant and reliable evidence of fraud 
B) perform substantive tests at an interim time period 
C) increase the extent of substantive testing 
D) keep the risk of misstatement to an acceptable low level 
A) gather more relevant and reliable evidence of fraud 
B) perform substantive tests at an interim time period 
C) increase the extent of substantive testing 
D) keep the risk of misstatement to an acceptable low level

Question 9

The auditor's responsibility for fraud detection is to:

Accepted Answer

A) plan the audit so sufficient appropriate evidence is gathered to determine whether the auditor has reasonable assurance that the financial statements are free of material misstatement from fraud or error 
B) plan the audit so sufficient appropriate evidence is gathered to determine whether the financial statements are free of misstatement 
C) plan the audit so sufficient appropriate evidence is gathered to determine whether the financial statements are free of material misstatement from fraud or error 
D) plan the audit so sufficient evidence is gathered to determine whether the financial statements are free of misstatement 
A) plan the audit so sufficient appropriate evidence is gathered to determine whether the auditor has reasonable assurance that the financial statements are free of material misstatement from fraud or error 
B) plan the audit so sufficient appropriate evidence is gathered to determine whether the financial statements are free of misstatement 
C) plan the audit so sufficient appropriate evidence is gathered to determine whether the financial statements are free of material misstatement from fraud or error 
D) plan the audit so sufficient evidence is gathered to determine whether the financial statements are free of misstatement

Question 10

The "relevance" of information

Accepted Answer

A) is related to the source and nature of the evidence and the circumstances under which the evidence is obtained 
B) is related to the legality of the evidence and the circumstances under which the evidence is obtained 
C) is related to the connection between the purpose of the audit evidence and the evidence gathered by the audit procedure 
D) is related to the purpose of the audit evidence and the variety of evidence gathered by the audit procedure 
A) is related to the source and nature of the evidence and the circumstances under which the evidence is obtained 
B) is related to the legality of the evidence and the circumstances under which the evidence is obtained 
C) is related to the connection between the purpose of the audit evidence and the evidence gathered by the audit procedure 
D) is related to the purpose of the audit evidence and the variety of evidence gathered by the audit procedure

Question 11

Which of the following are audit procedures used by the auditor to gather evidence?

Accepted Answer

A) analytical procedures 
B) interpretation 
C) analysis 
D) inquiry 
E) communication
F)both A and D
G)both B and C 
A) analytical procedures 
B) interpretation 
C) analysis 
D) inquiry 
E) communication
F)both A and D
G)both B and C

Question 12

The higher the risk of material misstatement,the more likely the auditor is to

Accepted Answer

A) gather more relevant and reliable evidence of fraud 
B) perform substantive tests at or near year end 
C) increase the extent of control testing 
D) keep the risk of misstatement to an acceptable low level 
A) gather more relevant and reliable evidence of fraud 
B) perform substantive tests at or near year end 
C) increase the extent of control testing 
D) keep the risk of misstatement to an acceptable low level

Question 13

The primary responsibility for fraud prevention and detection rests with

Accepted Answer

A) the law enforcement authorities 
B) the auditor 
C) the management of the company 
D) the legal counsel of the company 
A) the law enforcement authorities 
B) the auditor 
C) the management of the company 
D) the legal counsel of the company

Question 14

In documenting the nature,timing,and extent of audit procedures,the auditor should indicate

Accepted Answer

A) who authorized the work 
B) the date the work was completed 
C) who reviewed the work 
D) the results of the review 
E) the results of the risk assessment
F)both A and D
G)both B and C 
A) who authorized the work 
B) the date the work was completed 
C) who reviewed the work 
D) the results of the review 
E) the results of the risk assessment
F)both A and D
G)both B and C

In which ways can management prepare fraudulent financial statements?

Audit documentation

The relationship between risk and the extent of testing is

The "appropriateness" of audit evidence is

Significant findings are to be documented by the auditor,including actions taken to address them and the basis for the final conclusion reached.Findings that might be significant include

The higher the risk of material misstatement,the more likely the auditor is to

The auditor is required to document his response to the assessed risk of material misstatement.This documentation should include

The higher the risk of material misstatement,the more likely the auditor is to

The auditor's responsibility for fraud detection is to:

The "relevance" of information

Which of the following are audit procedures used by the auditor to gather evidence?

The higher the risk of material misstatement,the more likely the auditor is to

The primary responsibility for fraud prevention and detection rests with

In documenting the nature,timing,and extent of audit procedures,the auditor should indicate

What Is Auditing

The Audit Planning Process: Understanding the Risk of Material Misstatement

Internal Controls

Auditing the Revenue Business Process

Auditing the Acquisition and Expenditure Business Process

Auditing the Inventory Business Process

Audit Sampling: Tests of Internal Controls

Audit Sampling: Substantive Tests of Details

Cash and Investment Business Processes

Long-Term Debt and Owners Equity Business Process

Completing the Audit

Audit Reports

The Auditing Profession Glossary

Filters

Exam 5: Audit Evidence and the Auditors Responsibility for Fraud Detection

In which ways can management prepare fraudulent financial statements?

Audit documentation

The relationship between risk and the extent of testing is

The "appropriateness" of audit evidence is

Significant findings are to be documented by the auditor,including actions taken to address them and the basis for the final conclusion reached.Findings that might be significant include

The higher the risk of material misstatement,the more likely the auditor is to

The auditor is required to document his response to the assessed risk of material misstatement.This documentation should include

The higher the risk of material misstatement,the more likely the auditor is to

The auditor's responsibility for fraud detection is to:

The "relevance" of information

Which of the following are audit procedures used by the auditor to gather evidence?

The higher the risk of material misstatement,the more likely the auditor is to

The primary responsibility for fraud prevention and detection rests with

In documenting the nature,timing,and extent of audit procedures,the auditor should indicate

What Is Auditing

The Audit Planning Process: Understanding the Risk of Material Misstatement

Internal Controls

Auditing the Revenue Business Process

Auditing the Acquisition and Expenditure Business Process

Auditing the Inventory Business Process

Audit Sampling: Tests of Internal Controls

Audit Sampling: Substantive Tests of Details

Cash and Investment Business Processes

Long-Term Debt and Owners Equity Business Process

Completing the Audit

Audit Reports

The Auditing Profession Glossary

Filters