Question 1

What is the most important factor affecting the risk of management fraud?

Accepted Answer

A) Lack of integrity. 
B) Lack of internal controls 
C) Lack of board of director involvement in organization. 
D) Lack of audited financial statements. 
A) Lack of integrity. 
B) Lack of internal controls 
C) Lack of board of director involvement in organization. 
D) Lack of audited financial statements.

Question 2

Lack of integrity is the most important factor affecting the risk of management fraud.

Accepted Answer

A) True 
 B)False

Question 3

Misstating financial information in one period to prevent a loan being called for violating debt to equity covenants is okay as long as the violation is reversed in the next period.

Accepted Answer

A) True 
 B)False

Question 4

Management fraud is an intentional act that injures investors or creditors.

Accepted Answer

A) True 
 B)False

Question 5

Financial statement fraud is considered when someone knowingly makes material misrepresentations of fact with the intent of making someone believe the falsehood and suffer a loss as a result of acting upon that falsehood.Which of the following would be considered fraud?

Accepted Answer

A) Increasing the returns allowance as a result of unusually high sales near year end. 
B) Transferring non-performing assets at historical values to a non-consolidated subsidiary. 
C) Employee theft from petty cash. 
D) Purchasing several months' supply of office supplies in order to qualify for a large volume discount. 
A) Increasing the returns allowance as a result of unusually high sales near year end. 
B) Transferring non-performing assets at historical values to a non-consolidated subsidiary. 
C) Employee theft from petty cash. 
D) Purchasing several months' supply of office supplies in order to qualify for a large volume discount.

Question 6

The first digit in a social insurance number

Accepted Answer

A) Has no meaning. 
B) Is related to the date of birth of the recipient. 
C) Indicates the province or region where the number was issued. 
D) Is sequentially numbered based on when the card was issued. 
A) Has no meaning. 
B) Is related to the date of birth of the recipient. 
C) Indicates the province or region where the number was issued. 
D) Is sequentially numbered based on when the card was issued.

Question 7

External auditors are responsible

Accepted Answer

A) For authenticating documents. 
B) To report immaterial irregularities to a level of management at least one level above the level where the irregularities occurred. 
C) For finding intentional misstatements concealed by collusion. 
D) For reporting all irregularities to outside agencies or parties. 
A) For authenticating documents. 
B) To report immaterial irregularities to a level of management at least one level above the level where the irregularities occurred. 
C) For finding intentional misstatements concealed by collusion. 
D) For reporting all irregularities to outside agencies or parties.

Question 8

Which of the following statements best describes an auditor's responsibility to detect errors and other irregularities?

Accepted Answer

A) An auditor should design procedures to reduce the risk of not detecting a material misstatement to an appropriately low level. 
B) An auditor is responsible to detect material errors, but has no responsibility to detect material irregularities that are concealed through employee collusion or management override of the internal control system. 
C) An auditor has no responsibility to detect errors and irregularities unless analytical procedures or tests of transactions identify conditions that would cause a reasonably prudent auditor to suspect that the financial statements were materially misstated. 
D) An auditor has no responsibility to detect errors and irregularities because an auditor is not an insurer and an audit does not constitute a guarantee. 
A) An auditor should design procedures to reduce the risk of not detecting a material misstatement to an appropriately low level. 
B) An auditor is responsible to detect material errors, but has no responsibility to detect material irregularities that are concealed through employee collusion or management override of the internal control system. 
C) An auditor has no responsibility to detect errors and irregularities unless analytical procedures or tests of transactions identify conditions that would cause a reasonably prudent auditor to suspect that the financial statements were materially misstated. 
D) An auditor has no responsibility to detect errors and irregularities because an auditor is not an insurer and an audit does not constitute a guarantee.

Question 9

Which of the following is normally considered an accounting estimate?

Accepted Answer

A) Credit sales. 
B) Amortization of capital assets. 
C) Repairs and maintenance expense. 
D) Audit fees. 
A) Credit sales. 
B) Amortization of capital assets. 
C) Repairs and maintenance expense. 
D) Audit fees.

Question 10

According to U.S.standards, the external auditor's responsibility for discovering illegal acts involving a law and regulation that is far-removed from events that affect the financial statements does not include

Accepted Answer

A) Designing audit procedures to detect illegal acts in the absence of specific information brought to the auditors' attention. 
B) Performing audit procedures when specific information indicates that possible illegal acts may have a material indirect effect on financial statements. 
C) Considering the qualitative materiality of known and suspected illegal acts. 
D) Obtaining written management representations concerning the absence of violation of laws and regulations. 
A) Designing audit procedures to detect illegal acts in the absence of specific information brought to the auditors' attention. 
B) Performing audit procedures when specific information indicates that possible illegal acts may have a material indirect effect on financial statements. 
C) Considering the qualitative materiality of known and suspected illegal acts. 
D) Obtaining written management representations concerning the absence of violation of laws and regulations.

Question 11

Most frauds are committed by people with low level responsibilities in an organization.

Accepted Answer

A) True 
 B)False

Question 12

Over 90 percent of frauds are discovered by external or internal auditors.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

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. 
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 14

What six controls reveal red flags?

Accepted Answer

Missing documents (unaccounted for docum

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

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. 
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.

Question 17

When an auditor becomes aware of a possible illegal act by a client, the auditor should obtain an understanding of the nature of the act in order to

Accepted Answer

A) Evaluate the effect on the financial statements. 
B) Determine the reliability of management's representations. 
C) Consider whether other similar acts may have occurred. 
D) Recommend remedial actions to the audit committee. 
A) Evaluate the effect on the financial statements. 
B) Determine the reliability of management's representations. 
C) Consider whether other similar acts may have occurred. 
D) Recommend remedial actions to the audit committee.

Question 18

External auditors must design an audit to provide reasonable assurance of detecting material errors and irregularities.

Accepted Answer

A) True 
 B)False

Question 19

Jones CA is auditing the financial statements of XYZ Retailing, Inc.What assurance does
Jones provide XYZ that illegal acts that are material to financial statements will be detected?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 20

External auditors have the same responsibility for finding illegal acts as they do for finding material errors and irregularities.

Accepted Answer

A) True 
 B)False

What is the most important factor affecting the risk of management fraud?

Lack of integrity is the most important factor affecting the risk of management fraud.

Misstating financial information in one period to prevent a loan being called for violating debt to equity covenants is okay as long as the violation is reversed in the next period.

Management fraud is an intentional act that injures investors or creditors.

Financial statement fraud is considered when someone knowingly makes material misrepresentations of fact with the intent of making someone believe the falsehood and suffer a loss as a result of acting upon that falsehood.Which of the following would be considered fraud?

The first digit in a social insurance number

External auditors are responsible

Which of the following statements best describes an auditor's responsibility to detect errors and other irregularities?

Which of the following is normally considered an accounting estimate?

According to U.S.standards, the external auditor's responsibility for discovering illegal acts involving a law and regulation that is far-removed from events that affect the financial statements does not include

Most frauds are committed by people with low level responsibilities in an organization.

Over 90 percent of frauds are discovered by external or internal auditors.

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

What six controls reveal red flags?

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

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

When an auditor becomes aware of a possible illegal act by a client, the auditor should obtain an understanding of the nature of the act in order to

External auditors must design an audit to provide reasonable assurance of detecting material errors and irregularities.

Jones CA is auditing the financial statements of XYZ Retailing, Inc.What assurance does Jones provide XYZ that illegal acts that are material to financial statements will be detected?

External auditors have the same responsibility for finding illegal acts as they do for finding material errors and irregularities.

Introduction to Auditing

Audit, Assurance, and Quality Control Standards

Reports on Audited Financial Statements and Audited Internal Controlt

Professional Ethics and Auditor Responsibilities

Legal Liability

Preliminary Audit Planning: Understanding the Auditee

Assessing Risks and Internal Control

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

Revenues, Receivables, and Receipts Process

Purchases, Payables, and Payments Processtrue

Production and Payroll Process

Finance and Investment Process

Completing the Audit

Other Public Accounting Services and Reports

Filters

Exam 17: Fraud Awareness Auditing

What is the most important factor affecting the risk of management fraud?

Lack of integrity is the most important factor affecting the risk of management fraud.

Misstating financial information in one period to prevent a loan being called for violating debt to equity covenants is okay as long as the violation is reversed in the next period.

Management fraud is an intentional act that injures investors or creditors.

Financial statement fraud is considered when someone knowingly makes material misrepresentations of fact with the intent of making someone believe the falsehood and suffer a loss as a result of acting upon that falsehood.Which of the following would be considered fraud?

The first digit in a social insurance number

External auditors are responsible

Which of the following statements best describes an auditor's responsibility to detect errors and other irregularities?

Which of the following is normally considered an accounting estimate?

According to U.S.standards, the external auditor's responsibility for discovering illegal acts involving a law and regulation that is far-removed from events that affect the financial statements does not include

Most frauds are committed by people with low level responsibilities in an organization.

Over 90 percent of frauds are discovered by external or internal auditors.

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

What six controls reveal red flags?

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

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

When an auditor becomes aware of a possible illegal act by a client, the auditor should obtain an understanding of the nature of the act in order to

External auditors must design an audit to provide reasonable assurance of detecting material errors and irregularities.

Jones CA is auditing the financial statements of XYZ Retailing, Inc.What assurance does Jones provide XYZ that illegal acts that are material to financial statements will be detected?

External auditors have the same responsibility for finding illegal acts as they do for finding material errors and irregularities.

Introduction to Auditing

Audit, Assurance, and Quality Control Standards

Reports on Audited Financial Statements and Audited Internal Controlt

Professional Ethics and Auditor Responsibilities

Legal Liability

Preliminary Audit Planning: Understanding the Auditee

Assessing Risks and Internal Control

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

Revenues, Receivables, and Receipts Process

Purchases, Payables, and Payments Processtrue

Production and Payroll Process

Finance and Investment Process

Completing the Audit

Other Public Accounting Services and Reports

Filters