Question 1

During which stage(s)of the audit are auditors required to perform analytical procedures?

Accepted Answer

A) Planning stage 
B) Testing stage 
C) Evaluation stage 
D) Final stage 
E) Reporting stage
F)both A and D
G)both B and E

Question 2

The nature of the evidence refers to

Accepted Answer

A) the amount of evidence gathered during internal control testing or the sample size necessary for substantive tests of balances and transactions 
B) whether the evidence collection is gathered at an interim basis or at year end 
C) the purpose of the evidence and the specific audit procedure used to gather the evidence 
D) the relationship between the evidence gathered and the transaction being tested

Question 3

Audit documentation

Accepted Answer

A) is the property of the client 
B) is the property of the auditor 
C) is the property of the AICPA 
D) cannot be reviewed by a court of law hearing a case involving the client

Question 4

What are the types of fraud that might occur in a company?

Accepted Answer

A) misstatements might occur when unearned revenue is not properly recorded 
B) misstatements might occur from fraudulent financial reporting 
C) misstatements might occur when assets are misappropriated from the business 
D) misstatements might occur when inventory is not properly counted 
E) misstatements might occur when management adjustments are made at the end of the reporting period
F)Both B and C

Question 5

The fraud discussion may include the following elements

Accepted Answer

A) a discussion of auditor's involvement in supervising employees with access to cash or other assets susceptible to misappropriation 
B) a consideration of unusual or unexplained changes in the behavior or lifestyle of employees that have come to the attention of management 
C) a consideration of the types of circumstances that might indicate the possibility of fraud 
D) a discussion of how an element of predictability will be built into the nature,timing,and extent of audit procedures 
E) a discussion of any allegations of fraud that have come to the attention of the auditor
F)both A and B
G)both C and D
H)Both C and E

Question 6

Fraudulent journal entries often have unique characteristics.These include

Accepted Answer

A) the use of an unrelated,unusual,or seldom used account in the entry 
B) an entry made by an individual who normally makes ledger entries 
C) an entry recorded at the end of a time period or as a post closing entry with a good explanation of the reason for the adjustment 
D) no account numbers are associated with the entry 
E) the journal entry contains no round numbers nor numbers with consistent ending digits
F)both A and B
G)both A and D
H)both C and E

Question 7

In documenting the nature,timing,and extent of audit procedures,the auditor should indicate

Accepted Answer

A) who authorized the work 
B) the date the work was completed 
C) the results of the review of the work 
D) the date of the review 
E) the results of the risk assessment
F)both A and C
G)both B and D
H)both A and E

Question 8

In documenting the nature,timing,and extent of audit procedures,the auditor should indicate

Accepted Answer

A) who performed the work 
B) the date the work was started 
C) the results of the review of the work 
D) the date of the review 
E) the results of the risk assessment
F)both A and D
G)both B and D
H)both A and E

Question 9

Which of the following are audit procedures used by the auditor to gather evidence?

Accepted Answer

A) anecdotal procedures 
B) inspection 
C) analysis 
D) investigation 
E) confirmation
F)both A and C
G)both B and E

Question 10

The auditor is responsible for finding fraud in the audit.Is this statement true or false? Explain your answer.

Accepted Answer

The answer of The auditor is responsible for finding fraud...

Question 11

The auditor should complete the assembly of the final audit file within 45 days of the report release date (60 days for private companies).After the 45/60 day time period

Accepted Answer

A) the auditor should not delete or discard any information from the file 
B) new information can be added if necessary if accompanied by an explanation for the addition 
C) new information can be added if necessary if accompanied by management's approval for adding the information 
D) new information can be added if necessary if accompanied by the reissuance of the audit report 
E) new information can be added if necessary if the information was inadvertently omitted during the course of the audit
F)both A and B
G)both A and D

Question 12

Management can override controls by

Accepted Answer

A) suggesting fictitious journal entries (particularly at year end) 
B) inappropriately changing assumptions and methods used to estimate account balances 
C) omitting,advancing,or delaying modification of events that occurred during the reporting period 
D) disclosing facts that could affect the amounts recorded in the financial statements 
E) engaging in complex transactions designed to misrepresent the financial condition of the company
F)both A and D
G)both B and E
H)both C and E

Question 13

Management can override controls by

Accepted Answer

A) suggesting fictitious journal entries (particularly at year end) 
B) inappropriately changing assumptions and methods used to estimate account balances 
C) omitting,advancing,or delaying modification of events that occurred during the reporting period 
D) failing to disclose facts that could affect the amounts recorded in the financial statements 
E) engaging in complex transactions designed to represent the financial condition of the company
F)both A and C
G)both B and D
H)both C and E

Question 14

Main roadblocks to fraud detection are

Accepted Answer

A) weak internal controls 
B) auditor's lack of understanding of the client's system 
C) management override of internal controls 
D) lack of separation of duties 
E) collusion
F)both A and B
G)both B and D
H)Both C and E

Question 15

Significant findings are to be documented by the auditor,including actions taken to address them and the basis for the final conclusion reached.Findings that might be significant include

Accepted Answer

A) accounting for complex or unusual transactions or accounting estimates or uncertainties 
B) results of audit procedures indicating that the financial statements or disclosure could be materially misstated or the need for an auditor to revise his previous assessment of the risk of material misstatement 
C) circumstances that made it relatively easy for the auditor to apply auditing procedures 
D) findings that could result in modifications to management's report 
E) adjustments that the auditor has made to the financial statements
F)both A and B
G)both C and D

Question 16

An individual engaging in fraudulent activity

Accepted Answer

A) frequently has a complaint against the company 
B) is usually under paid 
C) is working for a company with excess cash 
D) may rationalize that the action is justifiable

Question 17

When the auditor performs analytical procedures

Accepted Answer

A) he evaluates the financial statements in the prior year by analyzing relationships between both financial and nonfinancial data. 
B) he evaluates the financial statements in the current year by analyzing relationships between both financial and nonfinancial data. 
C) he reviews the financial statements in the prior year by evaluating relationships between both financial and nonfinancial data. 
D) he reviews the financial statements in the current year by evaluating relationships between both financial and nonfinancial data.

Question 18

Three conditions are present in a company when fraud occurs.They are

Accepted Answer

A) revenge,opportunity,and rationalization 
B) pressure,revenge,and rationalization 
C) pressure,opportunity,and rationalization 
D) pressure,opportunity,and revenge

Question 19

Some personal financial problems that put pressure on management to engage in fraudulent activities include

Accepted Answer

A) addictions (gambling,alcohol,drugs) 
B) recent inheritance 
C) family member taking a new job 
D) promotion with relocation to another city 
E) high medical expenses
F)both A and C
G)both A and E
H)both C and E

Question 20

The auditor is required to document in the work papers his understanding of the company and its environment and his assessment of the risks of material misstatement.This documentation should include

Accepted Answer

A) the significant decisions during the discussion among the audit team regarding the susceptibility of the company's financial statements to material misstatement due to fraud 
B) where and why the discussion occurred 
C) the audit team members who were assigned to the audit 
D) the identified and assessed risks of material misstatement due to fraud at both the financial statement level,and the procedures performed to obtain the information 
E) both A and C
F)both A and D
G)both B and E

Exam 5: Audit Evidence and the Auditors Responsibility for Fraud Detection

During which stage(s) of the audit are auditors required to perform analytical procedures?

The nature of the evidence refers to

Audit documentation

What are the types of fraud that might occur in a company?

The fraud discussion may include the following elements

Fraudulent journal entries often have unique characteristics.These include

In documenting the nature,timing,and extent of audit procedures,the auditor should indicate

In documenting the nature,timing,and extent of audit procedures,the auditor should indicate

Which of the following are audit procedures used by the auditor to gather evidence?

The auditor is responsible for finding fraud in the audit.Is this statement true or false? Explain your answer.

The auditor should complete the assembly of the final audit file within 45 days of the report release date (60 days for private companies) .After the 45/60 day time period

Management can override controls by

Management can override controls by

Main roadblocks to fraud detection are

Significant findings are to be documented by the auditor,including actions taken to address them and the basis for the final conclusion reached.Findings that might be significant include

An individual engaging in fraudulent activity

When the auditor performs analytical procedures

Three conditions are present in a company when fraud occurs.They are

Some personal financial problems that put pressure on management to engage in fraudulent activities include

The auditor is required to document in the work papers his understanding of the company and its environment and his assessment of the risks of material misstatement.This documentation should include