Question 1

Which of the following is not considered one of the three factors that increase the probability of fraud?

Accepted Answer

A) Motive. 
B) Lack of training. 
C) Opportunity. 
D) Lack of integrity. 
A) Motive. 
B) Lack of training. 
C) Opportunity. 
D) Lack of integrity. B

Question 2

Which of the following is not a characteristic of fraud?

Accepted Answer

A) Intent to deceive. 
B) Misrepresentation or intentional omission of significant information. 
C) Taking unfair or dishonest advantage of others for personal gain. 
D) Negligence on the part of executive management. 
A) Intent to deceive. 
B) Misrepresentation or intentional omission of significant information. 
C) Taking unfair or dishonest advantage of others for personal gain. 
D) Negligence on the part of executive management. D

Question 3

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 A

Question 4

All errors and irregularities,including trivial ones,should be reported to the audit committee.

Accepted Answer

A) True 
 B)False

Question 5

Intentionally overstating revenues and assets or understating expenses and liabilities is known as ________.

Accepted Answer

A) creative accounting 
B) dangling 
C) employee fraud 
D) defalcation 
A) creative accounting 
B) dangling 
C) employee fraud 
D) defalcation

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Terrance was a model,longstanding employee who liked his job,but he felt that he was underpaid for what he contributed to the organization.As a result,he decided to start taking office supplies home to "even the score." This is an example of ________.

Accepted Answer

A) fraud opportunity 
B) fraud incentive 
C) fraud rationalization 
D) misstatement 
A) fraud opportunity 
B) fraud incentive 
C) fraud rationalization 
D) misstatement

Question 8

If an employee or non-employee wrongfully takes money or property entrusted to their care,custody,and control,this is known as ________.

Accepted Answer

A) white-collar crime 
B) embezzlement 
C) fraud 
D) irregularity 
A) white-collar crime 
B) embezzlement 
C) fraud 
D) irregularity

Question 9

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 10

If a supervisor sets a bad example by taking office supplies home for personal use,this affects which of the following factors that lead to fraud?

Accepted Answer

A) Fraud incentive. 
B) Fraud opportunity. 
C) Fraud rationalization. 
D) Fraud detection. 
A) Fraud incentive. 
B) Fraud opportunity. 
C) Fraud rationalization. 
D) Fraud detection.

Question 11

External auditors are required to report illegal acts to the appropriate governmental agency within 30 days of finding them.

Accepted Answer

A) True 
 B)False

Question 12

What are the typical conditions or circumstances that often accompany fraudulent financial reporting by management?

Accepted Answer

High debt,unfavourable industry conditio

Question 13

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 14

A fraud that involves the improper recognition of assets is known as a ________.

Accepted Answer

A) red flag 
B) dangling debit 
C) dangling credit 
D) profit squeeze 
A) red flag 
B) dangling debit 
C) dangling credit 
D) profit squeeze

Question 15

What are direct-effect illegal acts?

Accepted Answer

Illegal acts that have a direc

Question 16

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 17

Fraudulent financial reporting is a type of fraud perpetrated by management through exploitation of its authority.

Accepted Answer

A) True 
 B)False

Question 18

Riley embezzled a large sum of money from his company and gave it to his friend who recently lost his job and was in danger of losing his home.This is an example of what type of motivation?

Accepted Answer

A) Psychotic. 
B) Egocentric. 
C) Ideological. 
D) Economic. 
A) Psychotic. 
B) Egocentric. 
C) Ideological. 
D) Economic.

Question 19

"Thinking like a crook" is central to ________.

Accepted Answer

A) embezzlement 
B) fraud awareness auditing 
C) rationalization 
D) defalcation 
A) embezzlement 
B) fraud awareness auditing 
C) rationalization 
D) defalcation

Question 20

Briefly describe the three factors that increase the probability of fraud.

Accepted Answer

Motive,opportunity,and lack of integrity

Exam 7: Internal Control Over Financial Reporting

Which of the following is not considered one of the three factors that increase the probability of fraud?

Which of the following is not a characteristic of fraud?

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 ________.

All errors and irregularities,including trivial ones,should be reported to the audit committee.

Intentionally overstating revenues and assets or understating expenses and liabilities is known as ________.

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

Terrance was a model,longstanding employee who liked his job,but he felt that he was underpaid for what he contributed to the organization.As a result,he decided to start taking office supplies home to "even the score." This is an example of ________.

If an employee or non-employee wrongfully takes money or property entrusted to their care,custody,and control,this is known as ________.

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?

If a supervisor sets a bad example by taking office supplies home for personal use,this affects which of the following factors that lead to fraud?

External auditors are required to report illegal acts to the appropriate governmental agency within 30 days of finding them.

What are the typical conditions or circumstances that often accompany fraudulent financial reporting by management?

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.

A fraud that involves the improper recognition of assets is known as a ________.

What are direct-effect illegal acts?

The first digit in a social insurance number ________.

Fraudulent financial reporting is a type of fraud perpetrated by management through exploitation of its authority.

Riley embezzled a large sum of money from his company and gave it to his friend who recently lost his job and was in danger of losing his home.This is an example of what type of motivation?

"Thinking like a crook" is central to ________.

Briefly describe the three factors that increase the probability of fraud.

Introduction to Auditing

Auditors Professional Roles and Responsibilities

Auditors Ethical and Legal Responsibilities

Reports on Audited Financial Statements

Preliminary Audit Planning: Understanding the Auditees Business

Assessing Risks in an Audit Engagement

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

The Revenues, Receivables, and Receipts Process and Cash Account Balance

The Purchases, Payables, and Payments Process

Payroll and Production Processes

The Finance and Investment Process

hapter 15 Completing the Audit Work

Applying Professional Judgment to Form the Audit Opinion and Issue the Audit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

The Audit of Accounting Estimates: Basic Material Relating to Accounting Estimates

Legal Liability Cases

Other Professional Accounting Services and Reports, Including Fraud Auditing

Filters