Question 1

Which of the following questions is the auditor not required to ask company management when assessing fraud risk?

Accepted Answer

A) Does management have knowledge of any fraud or suspected fraud within the company? 
B) What are the nature of the fraud risks identified by management? 
C) Is management using all assets effectively? 
D) What internal controls have been implemented to address the fraud risks? 
A) Does management have knowledge of any fraud or suspected fraud within the company? 
B) What are the nature of the fraud risks identified by management? 
C) Is management using all assets effectively? 
D) What internal controls have been implemented to address the fraud risks?

Question 2

The most common fraud in the acquisition and payment cycle is for the perpetrator to issue payments to fictitious vendors and deposit the cash in fictitious accounts.What procedures could the company take to prevent this type of fraud?

Accepted Answer

Allowing payments to be made only to app

Question 3

Fictitious revenues:

Accepted Answer

A) increase accounts receivable turnover. 
B) understate the gross margin percentage. 
C) lower accounts receivable turnover. 
D) have no impact on the gross margin percentage. 
A) increase accounts receivable turnover. 
B) understate the gross margin percentage. 
C) lower accounts receivable turnover. 
D) have no impact on the gross margin percentage.

Question 4

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 5

Which of the following matters related to the auditor's consideration of material misstatements due to fraud are required to be documented?

Accepted Answer

A) Reasons supporting a conclusion that there is not a significant risk of material improper expense recognition 
B) Procedures performed to obtain information necessary to identify and assess the risks of material fraud 
C) Results of the internal auditor's procedures performed to address the risk of management override of controls 
D) Discussions with management regarding the hiring of a new plant manager 
A) Reasons supporting a conclusion that there is not a significant risk of material improper expense recognition 
B) Procedures performed to obtain information necessary to identify and assess the risks of material fraud 
C) Results of the internal auditor's procedures performed to address the risk of management override of controls 
D) Discussions with management regarding the hiring of a new plant manager

Question 6

Financial statement manipulation risk is arguably present for all companies' financial statements.However, the risk is elevated for companies that:

Accepted Answer

A) are heavily regulated. 
B) have low amounts of debt. 
C) have to make significant judgments for accounting estimates. 
D) operate in stable economic environments. 
A) are heavily regulated. 
B) have low amounts of debt. 
C) have to make significant judgments for accounting estimates. 
D) operate in stable economic environments.

Question 7

Which of the following does not represent an increased opportunity to commit fraud?

Accepted Answer

A) Related party transactions 
B) The company founder is the CEO and Chairman of the Board. 
C) The financial statements involve accounting estimates. 
D) The company is a new audit client for the CPA firm. 
A) Related party transactions 
B) The company founder is the CEO and Chairman of the Board. 
C) The financial statements involve accounting estimates. 
D) The company is a new audit client for the CPA firm.

Question 8

As part of designing and performing procedures to address management override of controls, auditors must perform which of the following procedures?

Accepted Answer

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

Question 9

When the allowance for doubtful accounts is understated, bad debt expense is understated and net income is also understated.

Accepted Answer

A) True 
 B)False

Question 10

An ineffective board of director oversight over financial reporting is an example of an incentives/pressures risk factor.

Accepted Answer

A) True 
 B)False

Question 11

Information and idea exchange sessions by the audit team are required by current auditing standards.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is a category of fraud?

Accepted Answer

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

Question 13

"An attitude, character, or set of ethical values exist that allow management or employees to commit a dishonest act …." describes the opportunities condition included in the fraud triangle.

Accepted Answer

A) True 
 B)False

Question 14

"Cookie jar reserves" are often created by companies whenever their earnings are high to create reserves for future periods when earnings need to be "boosted" upward.

Accepted Answer

A) True 
 B)False

Question 15

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 16

Which of the following is a correct statement regarding the misappropriation of receipts involving revenue?

Accepted Answer

A) One of the easiest frauds to detect is when a sale is not recorded and the cash from the sale is stolen. 
B) If a customer's payment is stolen, regular billing of unpaid accounts can uncover the fraud unless the fraud perpetrator does something to hide the theft. 
C) Misappropriation of cash receipts is generally as material as fraudulent reporting of revenues. 
D) Analytical procedures can detect relatively small thefts of sales and related cash receipts. 
A) One of the easiest frauds to detect is when a sale is not recorded and the cash from the sale is stolen. 
B) If a customer's payment is stolen, regular billing of unpaid accounts can uncover the fraud unless the fraud perpetrator does something to hide the theft. 
C) Misappropriation of cash receipts is generally as material as fraudulent reporting of revenues. 
D) Analytical procedures can detect relatively small thefts of sales and related cash receipts.

Question 17

Company management is often under pressure to increase revenue and/or net income.One approach is to use a "bill and hold" arrangement.This is an example of which of the following?

Accepted Answer

A) Significant accounting estimates 
B) Fictitious revenue recorded 
C) Premature revenue recognized 
D) Alteration of cutoff documents 
A) Significant accounting estimates 
B) Fictitious revenue recorded 
C) Premature revenue recognized 
D) Alteration of cutoff documents

Question 18

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.

Question 19

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 20

List and briefly describe the three conditions for fraud.

Accepted Answer

•Incentives/pressures - Management or ot

Exam 11: Fraud Auditing

Which of the following questions is the auditor not required to ask company management when assessing fraud risk?

The most common fraud in the acquisition and payment cycle is for the perpetrator to issue payments to fictitious vendors and deposit the cash in fictitious accounts.What procedures could the company take to prevent this type of fraud?

Fictitious revenues:

Misappropriation of assets is normally perpetrated by:

Which of the following matters related to the auditor's consideration of material misstatements due to fraud are required to be documented?

Financial statement manipulation risk is arguably present for all companies' financial statements.However, the risk is elevated for companies that:

Which of the following does not represent an increased opportunity to commit fraud?

As part of designing and performing procedures to address management override of controls, auditors must perform which of the following procedures?

When the allowance for doubtful accounts is understated, bad debt expense is understated and net income is also understated.

An ineffective board of director oversight over financial reporting is an example of an incentives/pressures risk factor.

Information and idea exchange sessions by the audit team are required by current auditing standards.

Which of the following is a category of fraud?

"An attitude, character, or set of ethical values exist that allow management or employees to commit a dishonest act …." describes the opportunities condition included in the fraud triangle.

"Cookie jar reserves" are often created by companies whenever their earnings are high to create reserves for future periods when earnings need to be "boosted" upward.

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

Which of the following is a correct statement regarding the misappropriation of receipts involving revenue?

Company management is often under pressure to increase revenue and/or net income.One approach is to use a "bill and hold" arrangement.This is an example of which of the following?

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

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

List and briefly describe the three conditions for fraud.

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, Control Risk, and Section 404 Audits

The Impact of Information Technology on the Audit Process

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

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, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

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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