Question 1

Fraud awareness training should be:

Accepted Answer

A)  broad and all-encompassing. 
B)  extensive and include details for all functional areas. 
C)  specifically related to the employee's job responsibility. 
D)  focused on employees understanding the importance of ethics. 
A)  broad and all-encompassing. 
B)  extensive and include details for all functional areas. 
C)  specifically related to the employee's job responsibility. 
D)  focused on employees understanding the importance of ethics.

Question 2

One of the strongest internal corporate governance mechanisms over senior management is the audit committee of the board of directors.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is not a factor that relates to opportunities to commit fraudulent financial reporting?

Accepted Answer

A)  Lack of controls related to the calculation and approval of accounting estimates. 
B)  Ineffective oversight of financial reporting by the board of directors. 
C)  Management's practice of making overly aggressive forecasts. 
D)  High turnover of accounting, internal audit, and information technology staff. 
A)  Lack of controls related to the calculation and approval of accounting estimates. 
B)  Ineffective oversight of financial reporting by the board of directors. 
C)  Management's practice of making overly aggressive forecasts. 
D)  High turnover of accounting, internal audit, and information technology staff.

Question 4

________ inquiry is used to ascertain whether information already obtained is correct, factual or truthful.

Accepted Answer

A)  Assessment 
B)  Declarative 
C)  Interrogative 
D)  Informational 
A)  Assessment 
B)  Declarative 
C)  Interrogative 
D)  Informational

Question 5

You are conducting an audit and you are concerned about revenue recognition issues because of timing concerns due to proper cutoff and channel stuffing (sales to distributors above "normal" business needs. Describe at least two audit procedures that would best address your concerns?

Accepted Answer

Review sales journal for unusual activit

Question 6

Auditors may identify conditions during fieldwork that change or support a judgment about the initial assessment of fraud risks. Which of the following is not a condition which should alert an auditor that the initial assessment should be changed?

Accepted Answer

A)  preliminary assessment of control risk has been modified 
B)  discrepancies in the accounting records 
C)  unusual relationships between the auditor and management 
D)  missing or conflicting evidence 
A)  preliminary assessment of control risk has been modified 
B)  discrepancies in the accounting records 
C)  unusual relationships between the auditor and management 
D)  missing or conflicting evidence

Question 7

Which of the following is not a factor that relates to opportunities to misappropriate assets?

Accepted Answer

A)  Inadequate internal controls over assets. 
B)  Presence of large amounts of cash on hand. 
C)  Inappropriate segregation of duties or independent checks on performance. 
D)  Adverse relationships between management and employees. 
A)  Inadequate internal controls over assets. 
B)  Presence of large amounts of cash on hand. 
C)  Inappropriate segregation of duties or independent checks on performance. 
D)  Adverse relationships between management and employees.

Question 8

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)
Employee conduct-Employees sh

Question 9

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

SAS No. 99 requires the following:
• Exa

Question 10

Misappropriation of assets is normally perpetrated at the lowest levels of the organization hierarchy.

Accepted Answer

A) True 
 B)False

Question 11

What are the three main types of revenue manipulations employed to commit fraudulent financial reporting and give an example for each type?

Accepted Answer

The three main types of revenue manipula

Question 12

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 13

Fraud is more prevalent in large businesses than small businesses and not-for-profit organizations.

Accepted Answer

A) True 
 B)False

Question 14

All misstatements the auditor finds during the audit should be evaluated for any indication of fraud.

Accepted Answer

A) True 
 B)False

Question 15

Which party has the primary responsibility to oversee an organization's financial reporting and internal control process?

Accepted Answer

A)  the board of directors 
B)  the audit committee 
C)  management of the company 
D)  the financial statement auditors 
A)  the board of directors 
B)  the audit committee 
C)  management of the company 
D)  the financial statement auditors

Question 16

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 17

Who is most likely to perpetrate fraudulent financial reporting?

Accepted Answer

A)  members of the board of directors 
B)  production employees 
C)  management of the company 
D)  the internal auditors 
A)  members of the board of directors 
B)  production employees 
C)  management of the company 
D)  the internal auditors

Question 18

List and briefly describe the three conditions for fraud arising from fraudulent financial reporting and misappropriation of assets as described in SAS No. 99.

Accepted Answer

• Incentives/pressures Management or oth

Question 19

While performing their audit, the audit team uncovers fraud that is likely to have an immaterial affect on the financial statements taken as whole. In this case the auditors should:

Accepted Answer

A)  plan on additional audit procedures to determine the exact amount of the fraud. 
B)  communicate with legal authorities as to the identity of the fraudsters. 
C)  disclose the fraud to the appropriate level of management or to the audit committee. 
D)  call the whistleblower hotline and name the suspected individuals. 
A)  plan on additional audit procedures to determine the exact amount of the fraud. 
B)  communicate with legal authorities as to the identity of the fraudsters. 
C)  disclose the fraud to the appropriate level of management or to the audit committee. 
D)  call the whistleblower hotline and name the suspected individuals.

Question 20

Describe the sources of information gathered to assess fraud risks.

Accepted Answer

When the auditor is assessing fraud risk

Exam 11: Fraud Auditing

Fraud awareness training should be:

One of the strongest internal corporate governance mechanisms over senior management is the audit committee of the board of directors.

Which of the following is not a factor that relates to opportunities to commit fraudulent financial reporting?

________ inquiry is used to ascertain whether information already obtained is correct, factual or truthful.

You are conducting an audit and you are concerned about revenue recognition issues because of timing concerns due to proper cutoff and channel stuffing (sales to distributors above "normal" business needs. Describe at least two audit procedures that would best address your concerns?

Auditors may identify conditions during fieldwork that change or support a judgment about the initial assessment of fraud risks. Which of the following is not a condition which should alert an auditor that the initial assessment should be changed?

Which of the following is not a factor that relates to opportunities to misappropriate assets?

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

Misappropriation of assets is normally perpetrated at the lowest levels of the organization hierarchy.

What are the three main types of revenue manipulations employed to commit fraudulent financial reporting and give an example for each type?

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

Fraud is more prevalent in large businesses than small businesses and not-for-profit organizations.

All misstatements the auditor finds during the audit should be evaluated for any indication of fraud.

Which party has the primary responsibility to oversee an organization's financial reporting and internal control process?

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

Who is most likely to perpetrate fraudulent financial reporting?

List and briefly describe the three conditions for fraud arising from fraudulent financial reporting and misappropriation of assets as described in SAS No. 99.

While performing their audit, the audit team uncovers fraud that is likely to have an immaterial affect on the financial statements taken as whole. In this case the auditors should:

Describe the sources of information gathered to assess fraud risks.

The Demand for Audit and Other Assurance Services

The CPA Profession

Audit Reports

Professional Ethics

Legal Liability

The CPA Profession

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Section 404 Audits of Internal Control and Control Risk

The Impact of Information Technology on the Audit Process

Overall Audit Plan 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 and Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls and 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 Balances

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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