Question 1

When assessing fraud risk, an auditor will adopt an attitude of:

Accepted Answer

A)   Confidentiality.
B)   Professional scepticism.
C)   Belief in management.
D)   None of the above. B

Question 2

If auditors identify risk factors that indicate that the going concern assumption is in doubt, they will:

Accepted Answer

A)   Undertake procedures to gather evidence regarding each risk factor.
B)   Refuse to continue as the auditor of their client.
C)   Report the client to the Canada Revenue Agency.
D)   Reduce the extent of further audit testing that they undertake. A

Question 3

Which of the following is an example of information used by auditors in gaining an understanding of a client at the entity level?

Accepted Answer

A)   The level of competition in the client's industry
B)   Whether the client is an importer or exporter of goods
C)   The client's ability to withstand currency fluctuations
D)   The level of government support in the client's industry B

Question 4

The going concern assumption is made when it is believed that:

Accepted Answer

A)   A company will become insolvent within the next accounting period.
B)   The board of directors does not believe the company's financial statements are fairly presented.
C)   A company will remain in business for the foreseeable future.
D)   A company is a separate legal entity.

Question 5

Saad Zuberov is a rookie auditor who has asked you about financial reporting frauds and how they differ from misappropriation of assets frauds. Identify for Saad Zuberov which one of the following frauds consists of misappropriation of assets.

Accepted Answer

A)   improper asset valuation
B)   unrecorded liabilities
C)   both a and b
D)   none of these

Question 6

When gaining an understanding of their clients, auditors consider the particular information technology risks faced by their clients. Explain the particular risks associated with information technology and discuss the main controls that companican have in place to mitigate these risks. CASE

Accepted Answer

The answer of When gaining an understanding of their clients,...

Question 7

Red flags that auditors can use to alert them to the possibility that a fraud may have occurred include:

Accepted Answer

A)   Strong internal controls.
B)   Routine transactions.
C)   A high turnover of key employees.
D)   Effective internal auditing staff.

Question 8

When assessing the risk of fraud, an auditor can consider:

Accepted Answer

A)   Attitudes and rationalization to justify a fraud.
B)   Incentives and pressures to commit fraud.
C)   Opportunities to perpetuate a fraud.
D)   All of the above.

Question 9

Mitigating factors that reduce going concern risk include the ability to raise additional funds through the sale of shares.

Accepted Answer

A) True 
 B)False

Question 10

When Sheila Copes, CPA audited a new client she asked questions about what the client does, how the client functions, the ownership structure of the client and its sourcof financing. She was getting an understanding of the client at the

Accepted Answer

A)   entity level.
B)   industry level.
C)   economy level.
D)   all of the above.

Question 11

Gerry Jonhas been asked to review manual or automated procedurthat typically operate at a business process level and apply to the processing of transactions by individual applications. What kind of controls is Gerry going to be assessing?

Accepted Answer

A)   output controls
B)   general controls
C)   a and b
D)   application controls

Question 12

MoniMarcelloni's team has been asked to tackle three ongoing frauds and her partner has asked her to follow up only on the financial reporting fraud. Which of the following items will she be pursuing?

Accepted Answer

A)   theft of stock by employees or customers
B)   employees remaining on the payroll after ceasing employment
C)   recording fictitious sales
D)   unauthorized refunds to customers

Question 13

In assessing the client's relationship with its employees, the auditor will consider:

Accepted Answer

A)   The level of unionization among the workforce.
B)   The attitude of staff to their employer.
C)   How well a client pays its employees.
D)   All of the above.

Question 14

The execution stage of an audit involves:

Accepted Answer

A)   evaluating the results of the detailed testing and forming an opinion on the fair presentation of the client's financial statements.
B)   the assessment of the audit firm's quality control procedures.
C)   the performance of detailed tests of controls and substantive testing of transactions and accounts.
D)   gaining an understanding of the client.

Question 15

Risks associated with information technology include:

Accepted Answer

A)  Loss of data.
B)   Errors in programs.
C)   Unauthorized access to computers.
D)   All of the above.

Question 16

Explain the three main stagof an audit of financial statements.

Accepted Answer

The answer of Explain the three main stagof an audit...

Question 17

Jack Franks was the accounts payable manager of ProLight Property Management Ltd. Jack started with the company as a bookkeeper and worked up to his current management position. He was promoted due to his dedication to the company and his reliability- he often worked evenings and weekends, rarely called in sick and he never took holidays. Despite making a good wage, Jack enjoyed living large, and the majority of his paycheque went to pay for his luxury car and designer clothes. As Jack was living paycheque to paycheque he was disappointed he did not have a "nest egg" set aside for retirement or emergency purposes. ProLight Property Management had a history of profitability. To reward its employees, the company had established a bonus scheme for meeting profit targets. It was a shock to all employewhen at the end of 2015, the company announced it had had the worst year in the company's history. The losswere significant and the company planned significant lay-offs in an attempt to turn this situation around. As a result, the accounting department was reduced by 35%, and the remaining staff was asked to do more. Jack found not only was he managing an unhappy accounts payable group, he was also now signing cheques, processing payables, and reconciling the bank account. This meant Jack was required to work even more without any pay increase or bonus in sight. For the first time in his career at ProLight, Jack was unhappy. While he was fearful further lay-offs may be coming, he also felt unappreciated and after all of his hard work, he was unhappy he was being asked to do more. Required: Discuss the incentives, opportunitiand rationalizations to commit fraud in this case.

Accepted Answer

The answer of Jack Franks was the accounts payable manager...

Question 18

Why must auditors gain an understanding of their client at the start of every audit?

Accepted Answer

The answer of Why must auditors gain an understanding of...

Question 19

An auditor is not concerned with transactions and events being recorded in the correct accounting period.

Accepted Answer