Exam 9: Auditing for Fraud

According to professional audit standards,how might an understanding of the nature of fraud that may occur in the client organization best be identified by the audit firm?

The threshold of materiality may be lowered in the case of potential fraud in the financial statements under audit.Why is this different from the usual materiality levels set by auditors?

Management rarely uses journal entries to commit fraud because they are easily noticed by the auditor.

Which of the following represents the primary difference between an audit and forensic accounting?

If management makes appropriate adjustments,but does not take appropriate steps to modify internal control in order to rectify the problem of fraud discovered in a financial statement audit,the decision has a direct impact on:

Linking internal control deficiencies to audit procedures After assessing internal control weakness the auditor develops audit procedures to explicitly test for the existence of the types of fraud or misstatement that could occur because of the weakness.In the linkage process from control deficiencies to audit procedures,what are the four questions involved in linking changes to the audit program?

Which of the following represents the size of company that has most commonly committed fraud in its financial reporting and by its employees?

When fraud risk is high in the organization under audit,the nature,timing and extent of procedures applied will likely need to be changed.

Which of the following are most often involved in perpetrating fraud in financial statement reporting?

In evaluating the effect of fraud upon the audit procedures the auditor should consider

Complex transactions such as derivative instruments provide management certain opportunities to manipulate financial statements to its advantage.

It is considered fraud for an employee of an organization to wrongly use influence to procure a personal benefit that is contrary to their duty to the organization.

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

Which of the following would most likely be considered intentional misapplication of accounting principles on financial statements?

If material fraud perpetrated by management is discovered by the auditor,the nature of the fraud should always be reported directly to:

When weaknesses in internal control are found,the auditor should develop audit procedures to explicitly test for the existence of the type of fraud or misstatement that could occur because of the weakness.

Professional skepticism involves such things as questioning and corroborating management responses to inquiries and determining the authenticity of documents.

Sam Jones,controller of Mitnikco,spends three days researching the accounting statements to find loopholes in the "rules" and to make a case for recognizing revenue earlier,rather than in later years.In the end,this enables the Company to achieve its earnings targets.What are the motivations of Mitnikco management based solely on the information above?

Brainstorming for fraud You are a staff auditor with Zepplin and Frank,CPAs.Your audit team is in the planning stage for Leppard Sullivan,Inc. ,a beauty supply wholesaler.Describe the brainstorming process and types of issues that may be brought to the surface regarding your client.

In actively considering fraud in the financial statement audit,the audit team will most likely realize which of the following when performing substantive procedures?