Exam 9: Auditing for Fraud

Auditor's fraud communication responsibilities Discuss the auditor's responsibility to communicate fraud to the audit committee.When is the auditor required to communicate possible fraud to parties other than the audit committee and management?

The auditor should not presume that fraud is present in revenue recognition by management because the auditor must remain objective.

What is the best method an auditor may use to detect fraud in the financial statements of clients?

Which of the following is most likely considered a material omission from the rules of financial statement reporting?

The fraud triangle consists of three components (pressure,opportunity,and rationalization).Which of the three components are present in most every fraud?

The landmark Enron fraud in the early 2000's involved the movement of significant debt off the books to related,unconsolidated entities.

Which of the following best represents financial statement fraud?

Auditor's response to fraud risk factors The auditor assesses the identified fraud risks after taking into account an evaluation of the client's programs and controls.How might the auditor respond to the results of the assessment of higher fraud risk?

Consideration of fraud in financial statement audits is a relatively new concept derived originally from SAS 99.

Relative to internal controls,what is a primary risk of fraud in the client company?

Fraud consideration by auditors John Beasley is interviewing with public accounting firms to become an auditor.John does not believe that fraud is a "big deal" in client organizations and argues that most individuals in management of companies are "honest people".He believes that auditors are becoming too cynical. Describe your response to John's attitude and discuss the major types of fraud that occur in companies.

Channel stuffing is often a form of fraud by financial manipulation and can be noticed by the auditor by performing analytical procedures directed toward the discovery of fraud indicators.

If the audit team discovers that fraud risk factors are present on an engagement,it should then:

Audit tests do not relate to fraud testing because fraud testing will be performed in a different (forensic)engagement.

Forensic accounting Contrast the financial statement auditor's consideration of fraud to that of a forensic accountant.

Fraud categories Corporate fraud may take place through a variety of methods.Identify the major categories of fraud and give examples of each.

Forensic accountants need to have superior interviewing and people skills.

When preliminary fraud risk is high the auditor should pay close attention to areas of the audit that are highly subjective and increase the predictability of the audit procedures.

Auditors are responsible to detect all illegal acts committed by the company and its employees.

Professional skepticism is best described as: