Question 1

Fraudulent financial reporting is an intentional act that results in materially misleading financial statements.

Accepted Answer

A) True 
 B)False

Question 2

CAS 240 requires auditors to ignore the traditional assumption of management's honesty.

Accepted Answer

A) True 
 B)False

Question 3

A fraud detection tool that assesses a firm along the five dimensions of accrual quality,financial performance,nonfinancial measures,off-balance sheet activities,and market-based incentives is called the ________.

Accepted Answer

A) Fraud Detector 
B) Embezzlease 
C) F-Score 
D) Red Flagger 
A) Fraud Detector 
B) Embezzlease 
C) F-Score 
D) Red Flagger

Question 4

The primary responsibility for the prevention and detection of fraud rests with ________.

Accepted Answer

A) external auditors 
B) internal auditors 
C) management 
D) the Audit Committee 
A) external auditors 
B) internal auditors 
C) management 
D) the Audit Committee

Question 5

Certain conditions are often present when a manager prepares deliberately misstated financial statements.Which of the following is NOT such a condition?

Accepted Answer

A) Unfavourable industry conditions. 
B) Lack of working capital. 
C) Low debt. 
D) Slow customer collections. 
A) Unfavourable industry conditions. 
B) Lack of working capital. 
C) Low debt. 
D) Slow customer collections.

Question 6

An F-Score can predict 60% of misstatements in financial statements that eventually come to light as restatements.

Accepted Answer

A) True 
 B)False

Question 7

What is meant by the term "professional skepticism?"

Accepted Answer

Ignoring the traditional assumption of m

Question 8

In an organization,who are the largest frauds typically committed by?

Accepted Answer

People who hold high executive

Question 9

A materiality standard does not exist for frauds.

Accepted Answer

A) True 
 B)False

Question 10

Errors can be either intentional or unintentional misstatements in financial statements.

Accepted Answer

A) True 
 B)False

Question 11

Provide examples of telltale hints that are indications of a cover-up of fraudulent activity in the accounting records.

Accepted Answer

Missing documents,cash shortages and ove

Question 12

Statistics on fraud show that ________.

Accepted Answer

A) senior executives commit the highest number of frauds and the senior executives cause the highest losses due to fraud 
B) employees below the level of senior executives commit the highest number of frauds and cause the highest losses due to fraud 
C) senior executives commit the highest number of frauds and employees below the level of the senior executives cause the highest losses due to fraud 
D) employees below the level of senior executives commit the highest number of frauds but the senior executives commit the highest-value frauds 
A) senior executives commit the highest number of frauds and the senior executives cause the highest losses due to fraud 
B) employees below the level of senior executives commit the highest number of frauds and cause the highest losses due to fraud 
C) senior executives commit the highest number of frauds and employees below the level of the senior executives cause the highest losses due to fraud 
D) employees below the level of senior executives commit the highest number of frauds but the senior executives commit the highest-value frauds

Question 13

Most frauds are committed by people below the top executive levels.

Accepted Answer

A) True 
 B)False

Question 14

An economic motive for fraud is the need for money.

Accepted Answer

A) True 
 B)False

Question 15

Unintentional misstatements or omissions of amounts or disclosures in financial statements are known as ________.

Accepted Answer

A) errors 
B) irregularities 
C) fraud 
D) embezzlement 
A) errors 
B) irregularities 
C) fraud 
D) embezzlement

Question 16

Defalcation is another name for _______.

Accepted Answer

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

Question 17

Auditors are responsible for making reasonable accounting estimates on behalf of management.

Accepted Answer

A) True 
 B)False

Question 18

Over 90% of frauds are discovered by external or internal auditors.

Accepted Answer

A) True 
 B)False

Question 19

An auditor who discovers that client employees have committed an illegal act with material consequences on the financial statements is most likely to seek legal advice and consider withdrawing from the engagement if ________.

Accepted Answer

A) the illegal act is a violation of generally accepted accounting principles 
B) the client does not take appropriate action after being informed about the illegal act 
C) the illegal act was committed during a prior year that was not audited 
D) the auditor has already assessed control risk at the maximum level 
A) the illegal act is a violation of generally accepted accounting principles 
B) the client does not take appropriate action after being informed about the illegal act 
C) the illegal act was committed during a prior year that was not audited 
D) the auditor has already assessed control risk at the maximum level

Question 20

Knowledge of the characteristics of SIN numbers can be useful to auditors when checking personnel files and the validity of people on the payroll.

Accepted Answer

A) True 
 B)False

Exam 7: Internal Control Over Financial Reporting

Fraudulent financial reporting is an intentional act that results in materially misleading financial statements.

CAS 240 requires auditors to ignore the traditional assumption of management's honesty.

A fraud detection tool that assesses a firm along the five dimensions of accrual quality,financial performance,nonfinancial measures,off-balance sheet activities,and market-based incentives is called the ________.

The primary responsibility for the prevention and detection of fraud rests with ________.

Certain conditions are often present when a manager prepares deliberately misstated financial statements.Which of the following is NOT such a condition?

An F-Score can predict 60% of misstatements in financial statements that eventually come to light as restatements.

What is meant by the term "professional skepticism?"

In an organization,who are the largest frauds typically committed by?

A materiality standard does not exist for frauds.

Errors can be either intentional or unintentional misstatements in financial statements.

Provide examples of telltale hints that are indications of a cover-up of fraudulent activity in the accounting records.

Statistics on fraud show that ________.

Most frauds are committed by people below the top executive levels.

An economic motive for fraud is the need for money.

Unintentional misstatements or omissions of amounts or disclosures in financial statements are known as ________.

Defalcation is another name for _______.

Auditors are responsible for making reasonable accounting estimates on behalf of management.

Over 90% of frauds are discovered by external or internal auditors.

An auditor who discovers that client employees have committed an illegal act with material consequences on the financial statements is most likely to seek legal advice and consider withdrawing from the engagement if ________.

Knowledge of the characteristics of SIN numbers can be useful to auditors when checking personnel files and the validity of people on the payroll.

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

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