Question 1

Fraudulent financial reporting is an intentional act that results in materially misleading financial statements.

Accepted Answer

A) True 
 B)False

Question 2

What are four of the elements of the internal control environment?

Accepted Answer

The following are elements of the intern

Question 3

Terrance was a model,longstanding employee who liked his job,but recently found himself burdened with expensive medical bills when his wife was diagnosed with cancer.As a result,he started taking small items of inventory home to sell on the black market.This is an example of ________.

Accepted Answer

A) fraud opportunity 
B) fraud incentive 
C) fraud rationalization 
D) misstatement 
A) fraud opportunity 
B) fraud incentive 
C) fraud rationalization 
D) misstatement

Question 4

Since management is most familiar with an organization,they should sit on the board of directors and advise those charged with governance of the organization.

Accepted Answer

A) True 
 B)False

Question 5

You are assessing the fraud risks at your client,Bourdain Industries,Inc.Which of the following would be considered an example of the opportunity component of the fraud triangle?

Accepted Answer

A) The company is required by the bank to maintain a debt-to-equity ratio no higher than 2 to 1 and a current ratio of 1.5 or higher. 
B) Management's compensation package includes stock options and a bonus tied to company profits. 
C) A prevalent sentiment amongst employees is that the company is flush with funds and could easily afford a small loss of assets. 
D) The company generates the bulk of its revenues via cash-based transactions and at any one time a high balance of cash is kept on hand. 
A) The company is required by the bank to maintain a debt-to-equity ratio no higher than 2 to 1 and a current ratio of 1.5 or higher. 
B) Management's compensation package includes stock options and a bonus tied to company profits. 
C) A prevalent sentiment amongst employees is that the company is flush with funds and could easily afford a small loss of assets. 
D) The company generates the bulk of its revenues via cash-based transactions and at any one time a high balance of cash is kept on hand.

Question 6

The existence of an independent audit committee is an example of what component of an internal control system?

Accepted Answer

A) Control activities 
B) Monitoring of Controls 
C) Control Environment 
D) Information and Communication 
A) Control activities 
B) Monitoring of Controls 
C) Control Environment 
D) Information and Communication

Question 7

Provide examples of telltale hints that are indications of a cover-up of fraudulent activity in the accounting records.

Accepted Answer

Missing documents,cash shortages and ove

Question 8

When an employee wrongfully includes non-business related expenses in their employee expense report,this is known as ________.

Accepted Answer

A) white-collar crime 
B) embezzlement 
C) Employee fraud 
D) An irregularity 
A) white-collar crime 
B) embezzlement 
C) Employee fraud 
D) An irregularity

Question 9

An auditor who discovers that client employees have committed an illegal act with material consequences on the financial statements is most likely to seek legal advice and consider withdrawing from the engagement if ________.

Accepted Answer

A) the illegal act is a violation of generally accepted accounting principles 
B) the client does not take appropriate action after being informed about the illegal act 
C) the illegal act was committed during a prior year that was not audited 
D) the auditor has already assessed control risk at the maximum level 
A) the illegal act is a violation of generally accepted accounting principles 
B) the client does not take appropriate action after being informed about the illegal act 
C) the illegal act was committed during a prior year that was not audited 
D) the auditor has already assessed control risk at the maximum level

Question 10

At what stage of the audit is the involvement of a forensic auditor most effective?

Accepted Answer

A) During the testing phase. 
B) At the initial planning stage. 
C) Only when an actual fraud has been detected. 
D) At the final conclusion and report phase 
A) During the testing phase. 
B) At the initial planning stage. 
C) Only when an actual fraud has been detected. 
D) At the final conclusion and report phase

Question 11

In the audit of ABC Company,where materiality was assessed as $15,000,three misstatements were detected: an improper asset capitalization of $18,000,an employee theft of $5,000 and a $5 posting error.In accordance with CAS 260,the auditor must report which of these misstatements to the audit committee?

Accepted Answer

A) Only the $18,000 misstatement. 
B) Both the $18,000 and $5,000 misstatement,but not the $5 error. 
C) All three misstatements must be reported. 
D) None of the misstatements need be reported to the audit committee,just to an appropriate level of management. 
A) Only the $18,000 misstatement. 
B) Both the $18,000 and $5,000 misstatement,but not the $5 error. 
C) All three misstatements must be reported. 
D) None of the misstatements need be reported to the audit committee,just to an appropriate level of management.

Question 12

Certain conditions are often present when a manager prepares deliberately misstated financial statements.Which of the following is NOT such a condition?

Accepted Answer

A) Unfavourable industry conditions. 
B) Lack of working capital. 
C) Low debt. 
D) Slow customer collections. 
A) Unfavourable industry conditions. 
B) Lack of working capital. 
C) Low debt. 
D) Slow customer collections.

Question 13

Over 40% of frauds are detected by tips from employees.

Accepted Answer

A) True 
 B)False

Fraudulent financial reporting is an intentional act that results in materially misleading financial statements.

What are four of the elements of the internal control environment?

Terrance was a model,longstanding employee who liked his job,but recently found himself burdened with expensive medical bills when his wife was diagnosed with cancer.As a result,he started taking small items of inventory home to sell on the black market.This is an example of ________.

Since management is most familiar with an organization,they should sit on the board of directors and advise those charged with governance of the organization.

You are assessing the fraud risks at your client,Bourdain Industries,Inc.Which of the following would be considered an example of the opportunity component of the fraud triangle?

The existence of an independent audit committee is an example of what component of an internal control system?

Provide examples of telltale hints that are indications of a cover-up of fraudulent activity in the accounting records.

When an employee wrongfully includes non-business related expenses in their employee expense report,this is known as ________.

An auditor who discovers that client employees have committed an illegal act with material consequences on the financial statements is most likely to seek legal advice and consider withdrawing from the engagement if ________.

At what stage of the audit is the involvement of a forensic auditor most effective?

Certain conditions are often present when a manager prepares deliberately misstated financial statements.Which of the following is NOT such a condition?

Over 40% of frauds are detected by tips from employees.

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

Filters

Exam 7: Internal Control Over Financial Reporting

Fraudulent financial reporting is an intentional act that results in materially misleading financial statements.

What are four of the elements of the internal control environment?

Terrance was a model,longstanding employee who liked his job,but recently found himself burdened with expensive medical bills when his wife was diagnosed with cancer.As a result,he started taking small items of inventory home to sell on the black market.This is an example of ________.

Since management is most familiar with an organization,they should sit on the board of directors and advise those charged with governance of the organization.

You are assessing the fraud risks at your client,Bourdain Industries,Inc.Which of the following would be considered an example of the opportunity component of the fraud triangle?

The existence of an independent audit committee is an example of what component of an internal control system?

Provide examples of telltale hints that are indications of a cover-up of fraudulent activity in the accounting records.

When an employee wrongfully includes non-business related expenses in their employee expense report,this is known as ________.

An auditor who discovers that client employees have committed an illegal act with material consequences on the financial statements is most likely to seek legal advice and consider withdrawing from the engagement if ________.

At what stage of the audit is the involvement of a forensic auditor most effective?

Certain conditions are often present when a manager prepares deliberately misstated financial statements.Which of the following is NOT such a condition?

Over 40% of frauds are detected by tips from employees.

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

Filters