Question 1

The primary responsibility for the prevention and detection of fraud rests with ________.

Accepted Answer

A) external auditors 
B) internal auditors 
C) management 
D) the Audit Committee 
A) external auditors 
B) internal auditors 
C) management 
D) the Audit Committee C

Question 2

External auditors are required to report illegal acts to the appropriate governmental agency within 30 days of finding them.

Accepted Answer

A) True 
 B)False  False

Question 3

An auditor can broadly define controls as ________.

Accepted Answer

A) those elements of an organization that,taken together,support people in achieving an organization's objectives 
B) those systems,processes,and procedures that prevent fraud 
C) key performance indicators employed by management to measure an organization's success 
D) the structure and culture of an organization which helps to eliminate risk 
A) those elements of an organization that,taken together,support people in achieving an organization's objectives 
B) those systems,processes,and procedures that prevent fraud 
C) key performance indicators employed by management to measure an organization's success 
D) the structure and culture of an organization which helps to eliminate risk A

Question 4

Personality red flags are a fail-safe way to detect an employee who commits fraud.

Accepted Answer

A) True 
 B)False

Question 5

According to a survey of auditors,the top three warning signs of fraud include all but which of the following?

Accepted Answer

A) Prior years' experience with management indicates a degree of dishonesty. 
B) Management places inordinate amount of importance on meeting earnings projections. 
C) Managers lied to the auditors or have been overly evasive in response to auditor inquiries. 
D) The auditee is a small company relatively few control activities. 
A) Prior years' experience with management indicates a degree of dishonesty. 
B) Management places inordinate amount of importance on meeting earnings projections. 
C) Managers lied to the auditors or have been overly evasive in response to auditor inquiries. 
D) The auditee is a small company relatively few control activities.

Question 6

All errors and irregularities,including trivial ones,should be reported to the audit committee.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not a characteristic of fraud?

Accepted Answer

A) Intent to deceive. 
B) Misrepresentation or intentional omission of significant information. 
C) Taking unfair or dishonest advantage of others for personal gain. 
D) Negligence on the part of executive management. 
A) Intent to deceive. 
B) Misrepresentation or intentional omission of significant information. 
C) Taking unfair or dishonest advantage of others for personal gain. 
D) Negligence on the part of executive management.

Question 8

According to the Criteria of Control Guidance on Control,what are four values and preferences of senior management that can greatly influence an organization?

Accepted Answer

Values and preferences of senior managem

Question 9

Intentionally overstating revenues and assets or understating expenses and liabilities is known as ________.

Accepted Answer

A) creative accounting 
B) dangling 
C) employee fraud 
D) defalcation 
A) creative accounting 
B) dangling 
C) employee fraud 
D) defalcation

Question 10

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

Accepted Answer

People who hold high executive

Question 11

What are the typical conditions or circumstances that often accompany fraudulent financial reporting by management?

Accepted Answer

High debt,unfavourable industry conditio

Question 12

Define application controls and provide examples.

Accepted Answer

Application controls are viewed in terms

Question 13

The likelihood that the financial statements will be materially misstatement as a result of misappropriation of assets is part of the auditor's assessment of ______.

Accepted Answer

A) Detection risk 
B) Information risk 
C) Acceptable audit risk 
D) Fraud risk 
A) Detection risk 
B) Information risk 
C) Acceptable audit risk 
D) Fraud risk

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Auditors are responsible for making reasonable accounting estimates on behalf of management.

Accepted Answer

A) True 
 B)False

Question 16

Management's philosophy and operating style have to do with how the business is operated and are not part of the internal control environment.

Accepted Answer

A) True 
 B)False

Question 17

"Thinking like a crook" is central to ________.

Accepted Answer

A) embezzlement 
B) fraud awareness auditing 
C) rationalization 
D) defalcation 
A) embezzlement 
B) fraud awareness auditing 
C) rationalization 
D) defalcation

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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 20

Unintentional misstatements or omissions of amounts or disclosures in financial statements are known as ________.

Accepted Answer

A) errors 
B) irregularities 
C) fraud 
D) embezzlement 
A) errors 
B) irregularities 
C) fraud 
D) embezzlement

Exam 7: Internal Control Over Financial Reporting

The primary responsibility for the prevention and detection of fraud rests with ________.

External auditors are required to report illegal acts to the appropriate governmental agency within 30 days of finding them.

An auditor can broadly define controls as ________.

Personality red flags are a fail-safe way to detect an employee who commits fraud.

According to a survey of auditors,the top three warning signs of fraud include all but which of the following?

All errors and irregularities,including trivial ones,should be reported to the audit committee.

Which of the following is not a characteristic of fraud?

According to the Criteria of Control Guidance on Control,what are four values and preferences of senior management that can greatly influence an organization?

Intentionally overstating revenues and assets or understating expenses and liabilities is known as ________.

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

What are the typical conditions or circumstances that often accompany fraudulent financial reporting by management?

Define application controls and provide examples.

The likelihood that the financial statements will be materially misstatement as a result of misappropriation of assets is part of the auditor's assessment of ______.

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

Auditors are responsible for making reasonable accounting estimates on behalf of management.

Management's philosophy and operating style have to do with how the business is operated and are not part of the internal control environment.

"Thinking like a crook" is central to ________.

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

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

Unintentional misstatements or omissions of amounts or disclosures in financial statements are 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 the Audit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

The Audit of Accounting Estimates: Basic Material Relating to Accounting Estimates

Legal Liability Cases

Other Professional Accounting Services and Reports, including Fraud Auditing

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