Question 1

Which of the following statements best describe the auditors' responsibilities concerning illegal acts?

Accepted Answer

A) Auditors must detect and report illegal acts to the appropriate level of authority. 
B) Auditors must consider suspicions of illegal acts that may directly or indirectly affect the financial statements or their assessment of management integrity. 
C) Auditors must ensure all illegal acts are detected and reported to those charged with governance. 
D) Auditors have no responsibility regarding illegal acts,as management is ultimately responsible for them. 
A) Auditors must detect and report illegal acts to the appropriate level of authority. 
B) Auditors must consider suspicions of illegal acts that may directly or indirectly affect the financial statements or their assessment of management integrity. 
C) Auditors must ensure all illegal acts are detected and reported to those charged with governance. 
D) Auditors have no responsibility regarding illegal acts,as management is ultimately responsible for them.

Question 2

If a supervisor sets a bad example by taking office supplies home for personal use,this affects which of the following factors that lead to fraud?

Accepted Answer

A) Fraud incentive. 
B) Fraud opportunity. 
C) Fraud rationalization. 
D) Fraud detection. 
A) Fraud incentive. 
B) Fraud opportunity. 
C) Fraud rationalization. 
D) Fraud detection.

Question 3

Distinguish between misstatements due to error and misstatements due to fraud and explain the auditor's responsibilities for the detection of both.

Accepted Answer

An error is an unintentional misstatemen

Question 4

Riley embezzled a large sum of money from his company and gave it to his friend who recently lost his job and was in danger of losing his home.This is an example of what type of motivation?

Accepted Answer

A) Psychotic. 
B) Egocentric. 
C) Ideological. 
D) Economic. 
A) Psychotic. 
B) Egocentric. 
C) Ideological. 
D) Economic.

Question 5

Lack of integrity is the most important factor affecting the risk of management fraud.

Accepted Answer

A) True 
 B)False

Question 6

An auditee's risk assessment process does not influence how the auditor assesses the risk of material misstatement.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not considered one of the three factors that increase the probability of fraud?

Accepted Answer

A) Motive. 
B) Lack of training. 
C) Opportunity. 
D) Lack of integrity. 
A) Motive. 
B) Lack of training. 
C) Opportunity. 
D) Lack of integrity.

Question 8

Knowledge of the characteristics of SIN numbers can be useful to auditors when checking personnel files and the validity of people on the payroll.

Accepted Answer

A) True 
 B)False

Question 9

Knowledge of the codes for the Canadian banking system can enable an auditor to spot a a crude cheque forgery.

Accepted Answer

A) True 
 B)False

Question 10

When an auditor becomes aware of a possible illegal act by a client,the auditor should obtain an understanding of the nature of the act in order to ________.

Accepted Answer

A) evaluate the effect on the financial statements 
B) determine the reliability of management's representations 
C) consider whether other similar acts may have occurred 
D) recommend remedial actions to the audit committee 
A) evaluate the effect on the financial statements 
B) determine the reliability of management's representations 
C) consider whether other similar acts may have occurred 
D) recommend remedial actions to the audit committee

Question 11

A good reason for involving fraud auditors in the planning of a regular audit of financial statements is _______.

Accepted Answer

A) when there are many fraud risk factors 
B) when the audit committee authorizes further investigation 
C) it makes the client aware of how seriously the auditor takes its fraud detection responsibility 
D) it improves the documentation standards of the financial statement audit 
A) when there are many fraud risk factors 
B) when the audit committee authorizes further investigation 
C) it makes the client aware of how seriously the auditor takes its fraud detection responsibility 
D) it improves the documentation standards of the financial statement audit

Question 12

What is meant by the term "professional skepticism?"

Accepted Answer

It means the auditor should make no assu

Question 13

Briefly describe the three components of the fraud triangle.

Accepted Answer

Incentives/Pressures,opportunity,and rat

Question 14

What is the most important factor affecting the risk of management fraud?

Accepted Answer

A) Lack of integrity. 
B) Lack of internal controls 
C) Lack of board of director involvement in organization. 
D) Lack of audited financial statements. 
A) Lack of integrity. 
B) Lack of internal controls 
C) Lack of board of director involvement in organization. 
D) Lack of audited financial statements.

Question 15

Jimmy,PA is currently performing test procedures to determine if access to the management accounting system is properly safeguarded with password systems to protect against unauthorized access.Jimmy is currently evaluating the __________.

Accepted Answer

A) Application controls 
B) Entity-level controls 
C) Tone at the top 
D) Control activities 
A) Application controls 
B) Entity-level controls 
C) Tone at the top 
D) Control activities

Question 16

Internal control includes ________.

Accepted Answer

A) control activities and inherent risks 
B) information systems and external influences 
C) the control environment and risk assessment processes 
D) financial reporting and control activities 
A) control activities and inherent risks 
B) information systems and external influences 
C) the control environment and risk assessment processes 
D) financial reporting and control activities

Question 17

Blame-shifting,irritability,and inability to make eye contact are all examples of _____.

Accepted Answer

A) The incentives/pressures fraud risk factor 
B) F-Score dimensions 
C) Personality red flags 
D) Defalcation 
A) The incentives/pressures fraud risk factor 
B) F-Score dimensions 
C) Personality red flags 
D) Defalcation

Question 18

White collar crime consists of non-violent misdeeds typically committed by lower-level employees.

Accepted Answer

A) True 
 B)False

Question 19

Canadian Auditing Standards require the auditor to presume there is always a risk of fraudulent revenue recognition.

Accepted Answer

A) True 
 B)False

Question 20

To assess the risk of material misstatement at the financial statement level,the auditor needs a detailed knowledge of internal control components relevant to financial reporting.

Accepted Answer

A) True 
 B)False

Exam 7: Internal Control Over Financial Reporting

Which of the following statements best describe the auditors' responsibilities concerning illegal acts?

If a supervisor sets a bad example by taking office supplies home for personal use,this affects which of the following factors that lead to fraud?

Distinguish between misstatements due to error and misstatements due to fraud and explain the auditor's responsibilities for the detection of both.

Riley embezzled a large sum of money from his company and gave it to his friend who recently lost his job and was in danger of losing his home.This is an example of what type of motivation?

Lack of integrity is the most important factor affecting the risk of management fraud.

An auditee's risk assessment process does not influence how the auditor assesses the risk of material misstatement.

Which of the following is not considered one of the three factors that increase the probability of fraud?

Knowledge of the characteristics of SIN numbers can be useful to auditors when checking personnel files and the validity of people on the payroll.

Knowledge of the codes for the Canadian banking system can enable an auditor to spot a a crude cheque forgery.

When an auditor becomes aware of a possible illegal act by a client,the auditor should obtain an understanding of the nature of the act in order to ________.

A good reason for involving fraud auditors in the planning of a regular audit of financial statements is _______.

What is meant by the term "professional skepticism?"

Briefly describe the three components of the fraud triangle.

What is the most important factor affecting the risk of management fraud?

Jimmy,PA is currently performing test procedures to determine if access to the management accounting system is properly safeguarded with password systems to protect against unauthorized access.Jimmy is currently evaluating the __________.

Internal control includes ________.

Blame-shifting,irritability,and inability to make eye contact are all examples of _____.

White collar crime consists of non-violent misdeeds typically committed by lower-level employees.

Canadian Auditing Standards require the auditor to presume there is always a risk of fraudulent revenue recognition.

To assess the risk of material misstatement at the financial statement level,the auditor needs a detailed knowledge of internal control components relevant to financial reporting.

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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