Question 1

Which of the following best defines fraud in a financial statement auditing context?

Accepted Answer

A) Fraud is an unintentional misstatement of the financial statements. 
B) Fraud is an intentional misstatement of the financial statements. 
C) Fraud is either an intentional or unintentional misstatement of the financial statements,depending on materiality. 
D) Fraud is either an intentional or unintentional misstatement of the financial statements,depending on consistency. 
A) Fraud is an unintentional misstatement of the financial statements. 
B) Fraud is an intentional misstatement of the financial statements. 
C) Fraud is either an intentional or unintentional misstatement of the financial statements,depending on materiality. 
D) Fraud is either an intentional or unintentional misstatement of the financial statements,depending on consistency.

Question 2

When dealing with fraudulent financial reporting risk for accounts payable,

Accepted Answer

A) companies will generally tend to overstate accounts payable. 
B) it is difficult for the auditor to verify if all liabilities have been recorded if prenumbered receiving reports are used. 
C) companies have used fictitious reductions to accounts payable to overstate net income. 
D) accounts payable is rarely a significant risk area for fraudulent financial reporting. 
A) companies will generally tend to overstate accounts payable. 
B) it is difficult for the auditor to verify if all liabilities have been recorded if prenumbered receiving reports are used. 
C) companies have used fictitious reductions to accounts payable to overstate net income. 
D) accounts payable is rarely a significant risk area for fraudulent financial reporting.

Question 3

The "tone at the top" provides a foundation upon which a more detailed code of conduct can be developed to provide specific guidance for the organization and its employees.Components of a code of conduct may include sections on 1)general employee conduct,2)relationships with clients and suppliers and 3)conflicts of interest.Give a narrative description of what might be included in each of the above components of a code of conduct.

Accepted Answer

(may vary)
General employee conduct-Empl

Question 4

Which of the following are elements of the fraud triangle?

Accepted Answer

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

Question 5

The two most common areas of fraud in payroll are the creation of fictitious employees and the overstatement of individual payroll hours.

Accepted Answer

A) True 
 B)False

Question 6

When the auditor identifies risk at the assertion level,

Accepted Answer

A) the auditor may need to obtain audit evidence that is more reliable and relevant. 
B) the auditor may choose to conduct substantive testing during interim periods rather than at the end of the period. 
C) the auditor may decrease the sample size. 
D) both a and b 
A) the auditor may need to obtain audit evidence that is more reliable and relevant. 
B) the auditor may choose to conduct substantive testing during interim periods rather than at the end of the period. 
C) the auditor may decrease the sample size. 
D) both a and b

Question 7

Discuss the need for maintaining professional skepticism during an audit.

Accepted Answer

Auditing standards require that the audi

Question 8

In the fraud triangle,fraudulent financial reporting and misappropriation of assets

Accepted Answer

A) share little in common. 
B) share most of the same risk factors. 
C) share the same three conditions of the fraud triangle. 
D) share most of the same conditions.of the fraud triangle. 
A) share little in common. 
B) share most of the same risk factors. 
C) share the same three conditions of the fraud triangle. 
D) share most of the same conditions.of the fraud triangle.

Question 9

Turnover in accounting personnel can create a rationalization for misstatement.

Accepted Answer

A) True 
 B)False

Question 10

The auditors should pay careful attention to accounting principles that involve subjective measurements or complex transactions.

Accepted Answer

A) True 
 B)False

Question 11

The pressure to do "whatever it takes" to meet goals is one of the main reasons why financial statement fraud occurs.

Accepted Answer

A) True 
 B)False

Question 12

In vertical analysis,the account balance is compared to the previous period,and the percentage change for the period is calculated.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following would the auditor be most concerned about regarding a heightened risk of intentional misstatement?

Accepted Answer

A) Senior management emphasizes that it is very important to beat analyst estimates of earnings every reporting period. 
B) Senior management emphasizes that budgeted amounts for expenses are to be achieved for each reporting period or explained in the variance analysis report. 
C) Senior management emphasizes that job rotation is a worthwhile corporate objective. 
D) Senior management emphasizes that job evaluations are based on performance. 
A) Senior management emphasizes that it is very important to beat analyst estimates of earnings every reporting period. 
B) Senior management emphasizes that budgeted amounts for expenses are to be achieved for each reporting period or explained in the variance analysis report. 
C) Senior management emphasizes that job rotation is a worthwhile corporate objective. 
D) Senior management emphasizes that job evaluations are based on performance.

Question 14

In the fraud triangle,fraudulent financial reporting and misappropriation of assets share the same conditions and risk factors.

Accepted Answer

A) True 
 B)False

Question 15

Senior management is responsible for promoting a culture of honesty and ethics.Describe what that implies for the organization.

Accepted Answer

Note: responses with examples may vary
M

Question 16

Auditors are required to perform certain procedures in every audit to address the risk of management override of internal controls.What are these procedures?

Accepted Answer

Auditing procedures require the followin

Question 17

When dealing with revenue frauds,

Accepted Answer

A) the most egregious form of revenue fraud involves premature revenue recognition. 
B) premature revenue recognition involves recognizing the revenue after the accounting standards requirements have been met. 
C) premature revenue recognition is the same as cutoff errors. 
D) side agreements can modify the terms of the sales transaction and should be analyzed carefully. 
A) the most egregious form of revenue fraud involves premature revenue recognition. 
B) premature revenue recognition involves recognizing the revenue after the accounting standards requirements have been met. 
C) premature revenue recognition is the same as cutoff errors. 
D) side agreements can modify the terms of the sales transaction and should be analyzed carefully.

Question 18

Because fraud perpetrators are often knowledgeable about audit procedures,auditors should incorporate unpredictability into the audit plan.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is a factor that relates to incentives or pressures to commit fraudulent financial reporting?

Accepted Answer

A) significant accounting estimates involving subjective judgments 
B) excessive pressure for management to meet debt repayment requirements 
C) management's practice of making overly aggressive forecasts 
D) high turnover of accounting,internal audit,and information technology staff 
A) significant accounting estimates involving subjective judgments 
B) excessive pressure for management to meet debt repayment requirements 
C) management's practice of making overly aggressive forecasts 
D) high turnover of accounting,internal audit,and information technology staff

Question 20

Who is responsible for setting the "tone at the top"?

Accepted Answer

A) management 
B) PCAOB 
C) audit committee 
D) SEC 
A) management 
B) PCAOB 
C) audit committee 
D) SEC

Exam 10: Fraud Auditing

Which of the following best defines fraud in a financial statement auditing context?

When dealing with fraudulent financial reporting risk for accounts payable,

Which of the following are elements of the fraud triangle?

The two most common areas of fraud in payroll are the creation of fictitious employees and the overstatement of individual payroll hours.

When the auditor identifies risk at the assertion level,

Discuss the need for maintaining professional skepticism during an audit.

In the fraud triangle,fraudulent financial reporting and misappropriation of assets

Turnover in accounting personnel can create a rationalization for misstatement.

The auditors should pay careful attention to accounting principles that involve subjective measurements or complex transactions.

The pressure to do "whatever it takes" to meet goals is one of the main reasons why financial statement fraud occurs.

In vertical analysis,the account balance is compared to the previous period,and the percentage change for the period is calculated.

Which of the following would the auditor be most concerned about regarding a heightened risk of intentional misstatement?

In the fraud triangle,fraudulent financial reporting and misappropriation of assets share the same conditions and risk factors.

Senior management is responsible for promoting a culture of honesty and ethics.Describe what that implies for the organization.

Auditors are required to perform certain procedures in every audit to address the risk of management override of internal controls.What are these procedures?

When dealing with revenue frauds,

Because fraud perpetrators are often knowledgeable about audit procedures,auditors should incorporate unpredictability into the audit plan.

Which of the following is a factor that relates to incentives or pressures to commit fraudulent financial reporting?

Who is responsible for setting the "tone at the top"?

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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