Question 1

Misappropriation of assets is normally perpetrated at the lowest levels of the organization hierarchy.

Accepted Answer

A) True 
 B)False  True

Question 2

Fraudulent financial reporting

Accepted Answer

A) always involves inadequate disclosures. 
B) can be intentional or unintentional. 
C) can involve understating net income in order to reduce income taxes. 
D) all of the above 
A) always involves inadequate disclosures. 
B) can be intentional or unintentional. 
C) can involve understating net income in order to reduce income taxes. 
D) all of the above C

Question 3

If employees have positive feelings about their employers,they are less likely to commit fraud.

Accepted Answer

A) True 
 B)False  True

Question 4

When assessing fraud risk,

Accepted Answer

A) fraud risk is assessed only at the overall financial statement level. 
B) the auditor's assessment of fraud risk should be ongoing throughout the audit. 
C) if the auditor concludes that there is a risk of material misstatement due to fraud,auditing standards require that the risks be treated as pervasive. 
D) auditing standards require that the auditor presume there is a risk of fraud in the inventory account. 
A) fraud risk is assessed only at the overall financial statement level. 
B) the auditor's assessment of fraud risk should be ongoing throughout the audit. 
C) if the auditor concludes that there is a risk of material misstatement due to fraud,auditing standards require that the risks be treated as pervasive. 
D) auditing standards require that the auditor presume there is a risk of fraud in the inventory account.

Question 5

When analyzing accounts for fraud risk,

Accepted Answer

A) companies will generally attempt to overstate accounts payable and net income. 
B) the inventory account is generally not susceptible to fraud since the auditor must verify the existence of the inventory. 
C) payroll is rarely a significant risk for fraudulent financial reporting. 
D) fixed assets are rarely stolen because of their large size. 
A) companies will generally attempt to overstate accounts payable and net income. 
B) the inventory account is generally not susceptible to fraud since the auditor must verify the existence of the inventory. 
C) payroll is rarely a significant risk for fraudulent financial reporting. 
D) fixed assets are rarely stolen because of their large size.

Question 6

Which of the following is True statement regarding professional skepticism?

Accepted Answer

A) Auditors reject most potential clients perceived as lacking honesty and integrity. 
B) If the auditor has past experience with a client,they can assume the client is honest. 
C) Material frauds occur in most of the audits of financial statements. 
D) Professional skepticism is required only during the planning phase. 
A) Auditors reject most potential clients perceived as lacking honesty and integrity. 
B) If the auditor has past experience with a client,they can assume the client is honest. 
C) Material frauds occur in most of the audits of financial statements. 
D) Professional skepticism is required only during the planning phase.

Question 7

A lack of controls over payments to vendors can cause revenue fraud.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not a factor that relates to opportunities to commit fraudulent financial reporting?

Accepted Answer

A) lack of controls related to the calculation and approval of accounting estimates 
B) ineffective oversight of financial reporting by the board of directors 
C) management's set of ethical values 
D) high turnover of accounting,internal audit,and information technology staff 
A) lack of controls related to the calculation and approval of accounting estimates 
B) ineffective oversight of financial reporting by the board of directors 
C) management's set of ethical values 
D) high turnover of accounting,internal audit,and information technology staff

Question 9

Which of the following is least likely to uncover fraud?

Accepted Answer

A) external auditors 
B) internal auditors 
C) internal controls 
D) management 
A) external auditors 
B) internal auditors 
C) internal controls 
D) management

Question 10

________ inquiry is used to obtain information about facts and details that the auditor does not have,usually about past or current events or processes.

Accepted Answer

A) Assessment 
B) Declarative 
C) Interrogative 
D) Informational 
A) Assessment 
B) Declarative 
C) Interrogative 
D) Informational

Question 11

With whom should the auditor communicate whenever he or she determines that senior management fraud may be present,even if the matter might be considered inconsequential?

Accepted Answer

A) PCAOB 
B) audit committee 
C) an appropriate level of management that is at least one level above those involved 
D) the internal auditors 
A) PCAOB 
B) audit committee 
C) an appropriate level of management that is at least one level above those involved 
D) the internal auditors

Question 12

Which of the following parties is responsible for implementing internal controls to minimize the likelihood of fraud?

Accepted Answer

A) external auditors 
B) audit committee members 
C) management 
D) Committee of Sponsoring Organizations 
A) external auditors 
B) audit committee members 
C) management 
D) Committee of Sponsoring Organizations

Question 13

Which of the following is an accurate statement regarding assets and fraud risk?

Accepted Answer

A) Companies will often capitalize repairs as fixed assets. 
B) Since fixed assets are often large,there is little theft of fixed assets. 
C) Intangible assets are recorded at cost and valuation issues therefore are not a fraud risk. 
D) Since companies have few fixed assets,there is no need for them to be periodically inventoried. 
A) Companies will often capitalize repairs as fixed assets. 
B) Since fixed assets are often large,there is little theft of fixed assets. 
C) Intangible assets are recorded at cost and valuation issues therefore are not a fraud risk. 
D) Since companies have few fixed assets,there is no need for them to be periodically inventoried.

Question 14

Auditors may identify conditions during fieldwork that change or support a judgment about the initial assessment of fraud risks.Which of the following is not a condition which should alert an auditor that the initial assessment should be changed?

Accepted Answer

A) The subsidiary ledger agrees with the general ledger. 
B) discrepancies in the accounting records 
C) unusual relationships between the auditor and management 
D) missing or conflicting evidence 
A) The subsidiary ledger agrees with the general ledger. 
B) discrepancies in the accounting records 
C) unusual relationships between the auditor and management 
D) missing or conflicting evidence

Question 15

Upon discovering information that indicates a material misstatement due to fraud may have occurred,auditors should

Accepted Answer

A) acquire additional evidence as needed. 
B) thoroughly probe the issues. 
C) consult with other team members. 
D) all of the above 
A) acquire additional evidence as needed. 
B) thoroughly probe the issues. 
C) consult with other team members. 
D) all of the above

Question 16

Ineffective oversight by the board of directors over financial reporting is an example of an incentives/pressures risk factor.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is a factor that relates to incentives/pressures to misappropriate assets?

Accepted Answer

A) weak internal controls 
B) significant personal financial obligations 
C) management's practice of making overly aggressive forecasts 
D) anger and fear 
A) weak internal controls 
B) significant personal financial obligations 
C) management's practice of making overly aggressive forecasts 
D) anger and fear

Question 18

Misappropriation of assets is normally perpetrated by

Accepted Answer

A) members of the board of directors. 
B) employees at lower levels of the organization. 
C) management of the company. 
D) the internal auditors. 
A) members of the board of directors. 
B) employees at lower levels of the organization. 
C) management of the company. 
D) the internal auditors.

Question 19

Define fraud and distinguish between the two main categories of fraud.

Accepted Answer

In the context of financial statement au

Question 20

Two of the most useful warning signals that can indicate that revenue fraud is occurring are

Accepted Answer

A) analytical procedures and documentary discrepancies. 
B) analytical procedures and misappropriation of assets. 
C) documentary discrepancies and vague responses to inquiries. 
D) missing audit evidence and vague responses to inquiries. 
A) analytical procedures and documentary discrepancies. 
B) analytical procedures and misappropriation of assets. 
C) documentary discrepancies and vague responses to inquiries. 
D) missing audit evidence and vague responses to inquiries.

Exam 10: Fraud Auditing

Misappropriation of assets is normally perpetrated at the lowest levels of the organization hierarchy.

Fraudulent financial reporting

If employees have positive feelings about their employers,they are less likely to commit fraud.

When assessing fraud risk,

When analyzing accounts for fraud risk,

Which of the following is True statement regarding professional skepticism?

A lack of controls over payments to vendors can cause revenue fraud.

Which of the following is not a factor that relates to opportunities to commit fraudulent financial reporting?

Which of the following is least likely to uncover fraud?

________ inquiry is used to obtain information about facts and details that the auditor does not have,usually about past or current events or processes.

With whom should the auditor communicate whenever he or she determines that senior management fraud may be present,even if the matter might be considered inconsequential?

Which of the following parties is responsible for implementing internal controls to minimize the likelihood of fraud?

Which of the following is an accurate statement regarding assets and fraud risk?

Auditors may identify conditions during fieldwork that change or support a judgment about the initial assessment of fraud risks.Which of the following is not a condition which should alert an auditor that the initial assessment should be changed?

Upon discovering information that indicates a material misstatement due to fraud may have occurred,auditors should

Ineffective oversight by the board of directors over financial reporting is an example of an incentives/pressures risk factor.

Which of the following is a factor that relates to incentives/pressures to misappropriate assets?

Misappropriation of assets is normally perpetrated by

Define fraud and distinguish between the two main categories of fraud.

Two of the most useful warning signals that can indicate that revenue fraud is occurring are

The Demand for Audit and Other Assurance Services

The Cpa Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Internal Control and Coso Framework

Assessing Control Risk and Reporting on Internal Controls

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls,

Completing the Tests in the Acquisition and Payment Cycle:

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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