Question 1

________ 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 2

Which of the following is the best reason for management to emphasize fraud prevention and deterrence?

Accepted Answer

A) It is often more effective and economical for companies to focus on fraud prevention and deterrence rather than on fraud detection. 
B) Collusion is impossible to detect. 
C) The AICPA requires management to implement a fraud prevention program. 
D) All of the above are equally valid reasons. 
A) It is often more effective and economical for companies to focus on fraud prevention and deterrence rather than on fraud detection. 
B) Collusion is impossible to detect. 
C) The AICPA requires management to implement a fraud prevention program. 
D) All of the above are equally valid reasons.

Question 3

Auditing standards specifically require auditors to identify ________ as a fraud risk in most audits.

Accepted Answer

A) overstated assets 
B) understated liabilities 
C) improper revenue recognition 
D) overstated expenses 
A) overstated assets 
B) understated liabilities 
C) improper revenue recognition 
D) overstated expenses

Question 4

List and briefly describe examples of risk factors for each condition of fraud for fraudulent financial reporting.

Accepted Answer

Incentives/Pressures: 1.Financial stabil

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Research indicates that the most effective way to prevent and deter fraud is to:

Accepted Answer

A) implement programs and controls that are based on core values embraced by the company. 
B) hire highly ethical employees. 
C) communicate expectations to all employees on an annual basis. 
D) terminate employees who are suspected of committing fraud. 
A) implement programs and controls that are based on core values embraced by the company. 
B) hire highly ethical employees. 
C) communicate expectations to all employees on an annual basis. 
D) terminate employees who are suspected of committing fraud.

Question 7

An auditor uses ________ inquiry to corroborate or contradict prior information.

Accepted Answer

A) assessment 
B) declarative 
C) interrogative 
D) informational 
A) assessment 
B) declarative 
C) interrogative 
D) informational

Question 8

Companies may intentionally understate earnings when income is high to create ________ that may be used in future years to increase earnings.

Accepted Answer

A) income smoothing 
B) cookie jar reserves 
C) cash 
D) sales 
A) income smoothing 
B) cookie jar reserves 
C) cash 
D) sales

Question 9

Financial statements of all companies are potentially subject to manipulation.

Accepted Answer

A) True 
 B)False

Question 10

A company is concerned with the theft of cash after the sale has been recorded.One way in which fraudsters conceal the theft is by a process called "lapping." Which of the following best describes lapping?

Accepted Answer

A) Reduce the customer's account by recording a sales return 
B) Write off the customer's account 
C) Apply the payment from another customer to the customer's account 
D) Reduce the customer's account by recording a sales allowance 
A) Reduce the customer's account by recording a sales return 
B) Write off the customer's account 
C) Apply the payment from another customer to the customer's account 
D) Reduce the customer's account by recording a sales allowance

Question 11

Management and the board of directors are responsible for setting the "tone at the top."

Accepted Answer

A) True 
 B)False

Question 12

Describe the sources of information gathered to assess fraud risks.

Accepted Answer

When the auditor is assessing fraud risk

Question 13

To address heightened risks of fraud, the auditor can do all of the following except:

Accepted Answer

A) use specialists to assist in evaluating the accuracy and reasonableness of management's key estimates. 
B) decrease the amount of substantive tests. 
C) use CL or IDEA to search for fictitious revenue transactions. 
D) use EXCEL to perform analytical procedures at the disaggregated level. 
A) use specialists to assist in evaluating the accuracy and reasonableness of management's key estimates. 
B) decrease the amount of substantive tests. 
C) use CL or IDEA to search for fictitious revenue transactions. 
D) use EXCEL to perform analytical procedures at the disaggregated level.

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

Which of the following is the best reason for management to emphasize fraud prevention and deterrence?

Auditing standards specifically require auditors to identify ________ as a fraud risk in most audits.

List and briefly describe examples of risk factors for each condition of fraud for fraudulent financial reporting.

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

Research indicates that the most effective way to prevent and deter fraud is to:

An auditor uses ________ inquiry to corroborate or contradict prior information.

Companies may intentionally understate earnings when income is high to create ________ that may be used in future years to increase earnings.

Financial statements of all companies are potentially subject to manipulation.

A company is concerned with the theft of cash after the sale has been recorded.One way in which fraudsters conceal the theft is by a process called "lapping." Which of the following best describes lapping?

Management and the board of directors are responsible for setting the "tone at the top."

Describe the sources of information gathered to assess fraud risks.

To address heightened risks of fraud, the auditor can do all of the following except:

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

Filters

Exam 11: Fraud Auditing

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

Which of the following is the best reason for management to emphasize fraud prevention and deterrence?

Auditing standards specifically require auditors to identify ________ as a fraud risk in most audits.

List and briefly describe examples of risk factors for each condition of fraud for fraudulent financial reporting.

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

Research indicates that the most effective way to prevent and deter fraud is to:

An auditor uses ________ inquiry to corroborate or contradict prior information.

Companies may intentionally understate earnings when income is high to create ________ that may be used in future years to increase earnings.

Financial statements of all companies are potentially subject to manipulation.

A company is concerned with the theft of cash after the sale has been recorded.One way in which fraudsters conceal the theft is by a process called "lapping." Which of the following best describes lapping?

Management and the board of directors are responsible for setting the "tone at the top."

Describe the sources of information gathered to assess fraud risks.

To address heightened risks of fraud, the auditor can do all of the following except:

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

Filters