Question 1

There are many important reasons to diligently plan for an audit.If an audit firm wrongly skips the planning stage of an audit,what will be detrimental relative to fraud?

Accepted Answer

A) The firm will not be able to apply GAAP to the financial statements. 
B) The firm will not adequately identify the types of fraud that may occur in the client company. 
C) The firm will not be able to perform direct tests of account balances. 
D) The firm will lack the competency and technical training necessary to complete the audit in accordance with GAAS. 
A) The firm will not be able to apply GAAP to the financial statements. 
B) The firm will not adequately identify the types of fraud that may occur in the client company. 
C) The firm will not be able to perform direct tests of account balances. 
D) The firm will lack the competency and technical training necessary to complete the audit in accordance with GAAS.

Question 2

Management fraud must be immediately reported by the auditor to the SEC rather than wasting time reporting it to the audit committee or board of directors.

Accepted Answer

A) True 
 B)False

Question 3

One fraud risk factor includes the presence of domineering members of management who seek the ultimate loyalty of subordinates.

Accepted Answer

A) True 
 B)False

Question 4

Detection of fraud is integral to the audit function.The best reason for this is that:

Accepted Answer

A) unless auditors can provide assurance that the financial statements are free of material misstatements due to fraud,there is no justification for the audit function. 
B) the AICPA has mandated that the auditor take on more responsibility than previously required because of management's demand for fraud finding. 
C) it is the responsibility of the auditor to provide internal control over a client organization sufficient to discover or prevent fraud from occurring. 
D) auditor fraud is a large concern of shareholders and the audit committee must continually monitor the auditors to ensure they are not misstating financial statements. 
A) unless auditors can provide assurance that the financial statements are free of material misstatements due to fraud,there is no justification for the audit function. 
B) the AICPA has mandated that the auditor take on more responsibility than previously required because of management's demand for fraud finding. 
C) it is the responsibility of the auditor to provide internal control over a client organization sufficient to discover or prevent fraud from occurring. 
D) auditor fraud is a large concern of shareholders and the audit committee must continually monitor the auditors to ensure they are not misstating financial statements.

Question 5

Which of the following is an example of a common type of financial reporting fraud?

Accepted Answer

A) Capitalizing major overhauls to operating equipment. 
B) Deferring service revenue until it is delivered to customers. 
C) Recording sales for inventory sold with the right to return. 
D) Excluding a contingent liability that has been settled. 
A) Capitalizing major overhauls to operating equipment. 
B) Deferring service revenue until it is delivered to customers. 
C) Recording sales for inventory sold with the right to return. 
D) Excluding a contingent liability that has been settled.

Question 6

SAS 99 requires the auditor to more actively consider and assess the risk of fraud for clients and their financial statements than had been required in the past.

Accepted Answer

A) True 
 B)False

Question 7

The audit of financial statements includes the initial approach of addressing fraud.How must an auditor address fraud in the planning stage?

Accepted Answer

A) The auditor must test for fraud in the planning stage by sampling accounts. 
B) The auditor must consider the likelihood of fraud existing in the company in the planning stage. 
C) The auditor must realize that most people are honest and not automatically assume that fraud exists when planning the audit. 
D) The auditor must not be aggressive in its initial approach to fraud as trust may be lost by the client. 
A) The auditor must test for fraud in the planning stage by sampling accounts. 
B) The auditor must consider the likelihood of fraud existing in the company in the planning stage. 
C) The auditor must realize that most people are honest and not automatically assume that fraud exists when planning the audit. 
D) The auditor must not be aggressive in its initial approach to fraud as trust may be lost by the client.

Question 8

Auditors must keep a questioning mind when analyzing management responses to inquiry and they should strive to obtain corroborating evidence before accepting the responses.

Accepted Answer

A) True 
 B)False

Question 9

When is the assessment of fraud risk on a single engagement completed by the audit team?

Accepted Answer

A) Upon completion of the planning stage. 
B) Once internal control is understood. 
C) Only after the audit risk model has been used to design tests. 
D) Once the audit is complete. 
A) Upon completion of the planning stage. 
B) Once internal control is understood. 
C) Only after the audit risk model has been used to design tests. 
D) Once the audit is complete.

Question 10

SAS 99 procedures must only be performed for clients that have had fraud concerns in the past.

Accepted Answer

A) True 
 B)False

Question 11

The key elements of the fraud triangle include all of the following except

Accepted Answer

A) Pressure 
B) Materiality 
C) Opportunity 
D) Rationalization 
A) Pressure 
B) Materiality 
C) Opportunity 
D) Rationalization

Question 12

The auditor can be satisfied with less than persuasive evidence in the audit process because of the believe that management is honest.

Accepted Answer

A) True 
 B)False

Question 13

The auditor of financial statements has a responsibility to actively consider fraud in order to obtain reasonable assurance that financial statements are free of material fraud.

Accepted Answer

A) True 
 B)False

Question 14

Pressure perceived by management to manipulate financial information is a common characteristic in fraud cases

Accepted Answer

A) True 
 B)False

Question 15

Brainstorming about the manner in which fraud may be committed should include all of the following except

Accepted Answer

A) Consider factors that might affect management motivation to misstate the financial statements 
B) Consider weaknesses in internal control that would allow a fraud to take place 
C) Consider the materiality of the individual account balances for substantive testing 
D) Consider factors that may enable an individual capable of committing a fraud to rationalize perpetrating it 
A) Consider factors that might affect management motivation to misstate the financial statements 
B) Consider weaknesses in internal control that would allow a fraud to take place 
C) Consider the materiality of the individual account balances for substantive testing 
D) Consider factors that may enable an individual capable of committing a fraud to rationalize perpetrating it

Question 16

According to professional audit standards,the audit team should meet early in the planning stages of an audit to conduct a fraud "brainstorming" meeting in order to determine the types of fraud that may occur with the client.

Accepted Answer

A) True 
 B)False

Question 17

Protection Transparency,Inc.is being audited by Messer and Bromely,LLP.During the assessment of fraud,Messer and Bromely discover that the controller has been creating fictional sales and posting them to the general ledger.Who should the auditors make aware of this issue?

Accepted Answer

A) Protection Transparency's legal counsel. 
B) The federal law enforcement agency. 
C) The chairman of Protection Transparency's audit committee. 
D) The predecessor auditor of Protection Transparency. 
A) Protection Transparency's legal counsel. 
B) The federal law enforcement agency. 
C) The chairman of Protection Transparency's audit committee. 
D) The predecessor auditor of Protection Transparency.

Question 18

What is the primary determinate in the difference between fraud and errors in financial statement reporting?

Accepted Answer

A) The materiality of the misstatement. 
B) The intent to deceive. 
C) The level of management involved. 
D) The type of transaction effected. 
A) The materiality of the misstatement. 
B) The intent to deceive. 
C) The level of management involved. 
D) The type of transaction effected.

Question 19

Once the fraud assessment is complete in the planning stage,the auditor need not consider fraud further.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following risks of fraud should ordinarily be presumed on a financial statement audit by the audit team?

Accepted Answer

A) Chief financial officer misappropriation of funds. 
B) Misapplication of revenue recognition principles. 
C) Management's inappropriate use of reserves. 
D) Lack of expenses related to stock options. 
A) Chief financial officer misappropriation of funds. 
B) Misapplication of revenue recognition principles. 
C) Management's inappropriate use of reserves. 
D) Lack of expenses related to stock options.

There are many important reasons to diligently plan for an audit.If an audit firm wrongly skips the planning stage of an audit,what will be detrimental relative to fraud?

Management fraud must be immediately reported by the auditor to the SEC rather than wasting time reporting it to the audit committee or board of directors.

One fraud risk factor includes the presence of domineering members of management who seek the ultimate loyalty of subordinates.

Detection of fraud is integral to the audit function.The best reason for this is that:

Which of the following is an example of a common type of financial reporting fraud?

SAS 99 requires the auditor to more actively consider and assess the risk of fraud for clients and their financial statements than had been required in the past.

The audit of financial statements includes the initial approach of addressing fraud.How must an auditor address fraud in the planning stage?

Auditors must keep a questioning mind when analyzing management responses to inquiry and they should strive to obtain corroborating evidence before accepting the responses.

When is the assessment of fraud risk on a single engagement completed by the audit team?

SAS 99 procedures must only be performed for clients that have had fraud concerns in the past.

The key elements of the fraud triangle include all of the following except

The auditor can be satisfied with less than persuasive evidence in the audit process because of the believe that management is honest.

The auditor of financial statements has a responsibility to actively consider fraud in order to obtain reasonable assurance that financial statements are free of material fraud.

Pressure perceived by management to manipulate financial information is a common characteristic in fraud cases

Brainstorming about the manner in which fraud may be committed should include all of the following except

According to professional audit standards,the audit team should meet early in the planning stages of an audit to conduct a fraud "brainstorming" meeting in order to determine the types of fraud that may occur with the client.

Protection Transparency,Inc.is being audited by Messer and Bromely,LLP.During the assessment of fraud,Messer and Bromely discover that the controller has been creating fictional sales and posting them to the general ledger.Who should the auditors make aware of this issue?

What is the primary determinate in the difference between fraud and errors in financial statement reporting?

Once the fraud assessment is complete in the planning stage,the auditor need not consider fraud further.

Which of the following risks of fraud should ordinarily be presumed on a financial statement audit by the audit team?

Auditing: Integral to the Economy

Corporate Governance and Audits

Judgmental and Ethical Decision-Making Frameworks and Associated Professional Standards

Audit Risk,business Risk,and Audit Planning

Internal Control Over Financial Reporting

Performing an Integrated Audit

A Framework for Audit Evidence

Tools Used in Gathering Audit Evidence

Auditing Revenue and Related Accounts

Audit of Acquisition and Payment Cycle and Inventory

Audit of Cash and Other Liquid Assets

Audit of Long-Lived Assets and Related Expense Accounts

Audit of Longer-Term Liabilities, equity, acquisitions, and Related-Entity Transactions, long-Term Liabilities, and Equity

Ensuring Audit Quality in Completing the Audit

Auditors Reports

Professional Liability

Advanced Topics Concerning Complex Audit Judgments

Filters

Exam 9: Auditing for Fraud

There are many important reasons to diligently plan for an audit.If an audit firm wrongly skips the planning stage of an audit,what will be detrimental relative to fraud?

Management fraud must be immediately reported by the auditor to the SEC rather than wasting time reporting it to the audit committee or board of directors.

One fraud risk factor includes the presence of domineering members of management who seek the ultimate loyalty of subordinates.

Detection of fraud is integral to the audit function.The best reason for this is that:

Which of the following is an example of a common type of financial reporting fraud?

SAS 99 requires the auditor to more actively consider and assess the risk of fraud for clients and their financial statements than had been required in the past.

The audit of financial statements includes the initial approach of addressing fraud.How must an auditor address fraud in the planning stage?

Auditors must keep a questioning mind when analyzing management responses to inquiry and they should strive to obtain corroborating evidence before accepting the responses.

When is the assessment of fraud risk on a single engagement completed by the audit team?

SAS 99 procedures must only be performed for clients that have had fraud concerns in the past.

The key elements of the fraud triangle include all of the following except

The auditor can be satisfied with less than persuasive evidence in the audit process because of the believe that management is honest.

The auditor of financial statements has a responsibility to actively consider fraud in order to obtain reasonable assurance that financial statements are free of material fraud.

Pressure perceived by management to manipulate financial information is a common characteristic in fraud cases

Brainstorming about the manner in which fraud may be committed should include all of the following except

According to professional audit standards,the audit team should meet early in the planning stages of an audit to conduct a fraud "brainstorming" meeting in order to determine the types of fraud that may occur with the client.

Protection Transparency,Inc.is being audited by Messer and Bromely,LLP.During the assessment of fraud,Messer and Bromely discover that the controller has been creating fictional sales and posting them to the general ledger.Who should the auditors make aware of this issue?

What is the primary determinate in the difference between fraud and errors in financial statement reporting?

Once the fraud assessment is complete in the planning stage,the auditor need not consider fraud further.

Which of the following risks of fraud should ordinarily be presumed on a financial statement audit by the audit team?

Auditing: Integral to the Economy

Corporate Governance and Audits

Judgmental and Ethical Decision-Making Frameworks and Associated Professional Standards

Audit Risk,business Risk,and Audit Planning

Internal Control Over Financial Reporting

Performing an Integrated Audit

A Framework for Audit Evidence

Tools Used in Gathering Audit Evidence

Auditing Revenue and Related Accounts

Audit of Acquisition and Payment Cycle and Inventory

Audit of Cash and Other Liquid Assets

Audit of Long-Lived Assets and Related Expense Accounts

Audit of Longer-Term Liabilities, equity, acquisitions, and Related-Entity Transactions, long-Term Liabilities, and Equity

Ensuring Audit Quality in Completing the Audit

Auditors Reports

Professional Liability

Advanced Topics Concerning Complex Audit Judgments

Filters