Exam 11: Financial Statement Fraud

Your audit team, working with a newly acquired client, discovers that there has been fraudulent financial reporting for the past five years. Who is most likely to have been involved in the fraud?

Which of the following statements is true?

Corporate financial statement fraud discovered in 2001 resulted in how many of the ten largest corporate bankruptcies in United States history?

An auditor adjusts the audit plan by introducing unexpected audit procedures in response to what the auditor believes management may be doing to conceal a fraud based on management's strategic reasoning. Which order of reasoning is occurring here?

Should nonfinancial indicators be used for assessing fraud risk? Why or why not?

Which of the following is NOT an activity specifically listed in the text as prohibited by the Sarbanes-Oxley Act for an auditor of a company to perform contemporaneously?

According to the text authors, educators have failed in three areas and contributed to "the perfect fraud storm" that saw a rise in fraud activity in recent years. Which of the following is NOT one of those areas?

Which of the following occurs when an auditor and auditee only consider conditions that directly affect themselves but not the other party?

Your firm has just acquired a new audit client. The new client is highly leveraged with borrowing from several institutions. It is planning to expand the business by obtaining additional debt finance in the near future. Based on these facts, which one of the following should be most carefully examined?

Which of the following is depicted when the auditor simply considers his or her own incentives, such as audit fees, sampling costs, and penalties?

Which of the following is an example of a perceived opportunity that can lead to financial statement fraud?

Which of the following observations concerning backdating of options is true?

In this phase of the economy, most businesses appear to be highly profitable.

Which of the following actions by the company auditor increases the potential to detect fraud?

Which of the following refers to when the auditor considers conditions that directly affect the auditee?

Which of the following are considered the backbone of capitalism and allow investors, lenders, and regulators to measure the performance of a business?

According to the study done by the Securities and Exchange Commission, in what area were the greatest number of enforcement actions taken?

Which of the following is least likely to indicate possible financial statement fraud?

Which of the following is an example of examining nonfinancial data to detect fraud?

Which is a common method of providing executive compensation by allowing top management to purchase stock at a fixed share price?