Deck 21: Other Professional Accounting Services and Reports, Including Fraud Auditing

Question 1

In the audit of financial statements,which of the following procedures would the auditor call an "extended procedure?"

A)Measure the time lag between the date that cash receipts are recorded in the accounting records and the date that the deposit is credited to the bank account.
B)Observe the client's physical inventory count and take test counts of stock in the warehouse.
C)Send positive confirmations on accounts receivable balances.
D)Interview the staff in the accounting department and document the controls over the recording of sales transactions.

Answer 1

A

Question 2

Which of the following statements regarding agreed-upon procedures is FALSE?

A)They amount to an audit.
B)They do not meet with generally accepted auditing standards.
C)They have a limited scope.
D)They are typically initiated by the client.

Answer 2

A

Question 3

The purpose of an operational audit is to ________.

A)determine the effectiveness of internal controls
B)detect material misstatements in the company's financial statements
C)provide assurance on fair presentation of company financial statements
D)assess the economy,efficiency,and effectiveness of resources and objectives

Answer 3

D

Question 4

In 2012,Marg Levy,PA,performed an environmental audit of Scoop Mining.As a result of that engagement,she prepared a report which included several recommendations to improve compliance with environmental protection laws.In 2012,Ms.Levy has been approached to perform another audit of environmental protection procedures,some of which are based on her earlier recommendations.Which of the following statements is TRUE?

A)Ms.Levy must decline the audit as it conflicts with her independence.
B)Ms.Levy must restrict herself to performing specified tests of procedures that were not in her recommendations in order to protect her independence.
C)Ms.Levy may perform the audit including work on her recommended procedures,as independence is less important in an environmental compliance audit than in a financial statement audit.
D)Ms.Levy may perform the audit including work on her recommended procedures since she cannot be associated with nonfinancial information,so the concept of independence does not apply.

Question 5

An operational audit would NOT include determining ________.

A)Whether the entity is acquiring,protecting,and using its resources effectively.
B)The effectiveness of an organization and its programs,activities,and functions.
C)The causes of inefficiencies or uneconomical practices.
D)Whether the entity has complied with laws and regulations.

Question 6

Comparing the data on a fraud suspect's spending with known income is an extended procedure known as ________.

A)horizontal analysis
B)vertical analysis
C)expenditure analysis
D)surveillance

Question 7

The most common reporting framework in Canada is the ________.

A)compliance framework
B)special purpose framework
C)prospective framework
D)fair presentation framework

Question 8

Forensic accounting can be defined as ________.

A)investigating possible fraud
B)designing internal controls and other corporate governance mechanisms
C)calculating estimates used in financial reports
D)applying accounting and auditing skills in an action under civil or criminal law

Question 9

Before reporting on the financial statements of a Canadian entity that have been prepared in accordance with the accounting principles of another country,an auditor practising in Canada should ________.

A)understand the accounting principles that are generally accepted in the other country
B)be certified by the appropriate auditing or accountancy board of the other country
C)notify management that the auditor is required to deny an opinion on the financial statements
D)recast the financial statements according to Canadian GAAP

Question 10

In a(n)________ engagement,the practitioner offers a conclusion on the accountable party's written assertion.

A)attest
B)direct reporting
C)forensic
D)compilation

Question 11

The term significance as used in the assurance standards refers to ________.

A)the concept of materiality extended to nonfinancial factors
B)an amount greater than materiality for audit purposes
C)an estimate of risk in an assurance engagement
D)the importance of a criterion for evaluation of information

Question 12

In a direct reporting engagement,the assertions ________.

A)must be in written form
B)are expressed verbally
C)may only be implied
D)can be in written form or expressed verbally

Question 13

When independent CAs in public practice take engagements to audit governmental units or entities that receive financial assistance from governmental units,they must follow ________.

A)GAAS only
B)GAAS and PS
C)PS only
D)internal auditing standards

Question 14

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

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 15

One of the key differences between a financial statement audit and a value for money (VFM)audit is ________.

A)in most cases,VFM audits have mandates established through legislation or contracts
B)in a financial statement audit,the auditor has to use his or her professional judgment to redefine the broad mandate in specific terms with specific objectives
C)in a VFM audit,standards are defined by professions and associations
D)in a financial statement audit,sufficient appropriate evidence must be obtained to afford a reasonable basis to support the content of the auditor's report

Question 16

A PA's audit client is a small charity which funds development projects in a small foreign country.Most of its donations come in the form of cash,with tax receipts issued to the donors.Included in the cash receipts are weekly donations by one person,Mr.X,whose last name is easily identifiable as coming from that foreign country.Some of these cash donations exceed $10,000.The PA once asked about Mr.X and accepted as an answer that Mr.X was a wealthy entrepreneur but the PA has done no other work.Which of the following statements is TRUE?

A)Assuming the PA has performed all other necessary and appropriate procedures,he may provide a clean opinion.
B)Assuming the PA does no further investigation of this matter,the PA may be considered willfully blind and complicit in an illegal act.
C)The PA may be associated with misleading information and should withdraw from the audit.
D)The PA should try to count the cash as it comes in order to avoid issuing a scope limitation report.

Question 17

Horizontal analysis can be used in fraud detection by ________.

A)checking the trend in earnings from year to year of persons suspected of fraud
B)looking for significant changes in financial statement amounts and ratios across several fiscal periods
C)looking for odd relations of one account to a base such as sales
D)looking for the change in net worth of a suspect from the beginning to the end of a period

Question 18

Economy is related to ________.

A)efficiency variance
B)volume variance
C)price variance
D)capacity variance

Question 19

The objective of internal auditing is service to ________.

A)management
B)a specific department
C)the organization
D)the audit committee

Question 20

Auditors of governmental units would be presumed to be lacking in independence if they were ________.

A)free from sources of external impairment
B)organizationally independent
C)members of a political party that campaigned against the program under audit
D)auditing in a level of government other than the one to which they are normally assigned

Question 21

A VFM audit will tend to use a multidisciplinary audit team with expertise in different areas such as like economics or engineering.

Question 22

An environmental audit focuses on compliance with legislation rather than the effect of compliance on the financial statements.

Question 23

The most effective long-run prevention of employee fraud is the practice of management caring for their employees.What can managers do to aid in fraud prevention?

Question 24

Effectiveness refers to outputs of resources maximized for the related inputs and inputs minimized for the related outputs.

Question 25

Federal and provincial governments and their agencies and local governments use the CICA Public Sector Standards to guide their audits.

Question 26

Since the Management Discussion & Analysis report is not part of the financial statements,the auditor bears no responsibility for it.

Question 27

What does "willfully blind" mean within the context of fraud?

Question 28

Fraud examiners refer to people engaged specifically in the work of fraud investigation.

Question 29

When financial auditors suspect financial reporting fraud,they should discuss their suspicions with the client to see there is an alternative explanation.

Question 30

Briefly distinguish between a compliance audit and a value-for-money audit.

Question 31

In Value for Money audits,the focus is on the financial statements.

Question 32

Designing tight control systems is likely the best long-term solution to preventing fraud.

Question 33

Unlike other auditors,fraud examiners think of materiality as a cumulative amount.

Question 34

A financial ________ depends on one or more hypothetical assumptions.

A)statement
B)projection
C)plan
D)forecast

Question 35

The environmental audit evaluates a company's operations and performance in terms of conformity with federal,provincial,and municipal laws and regulations.

Question 36

Explain briefly the purpose of a value-for-money (VFM)audit.

Question 37

The nature of extended procedures regarding fraud auditing is limited only by an auditor's imagination.

Question 38

If a prospectus is issued more than 90 days beyond the balance sheet date,the auditor will need to perform procedures on interim financial statement information prior to permitting the use of their audit opinion in the prospectus.

Question 39

Auditors should mark the evidence,identifying the location,condition,date,time,and circumstances as soon as it appears to be a signal of fraud.

Question 40

What must prospective financial statements contain?

Question 41

In engagements requiring the use of foreign standards,what are the expectations of Canadian auditors?

Question 42

What is Management's Discussion and Analysis?