Description : Fraudulent financial reporting is often called: a. Theft of assets b. Employee fraud c. Management fraud d. Defalcation
Last Answer : Management fraud
Description : Which of the following statements is correct relating to the auditor's consideration of fraud? a. The auditor's interest in fraud consideration relates to fraudulent acts that cause a material ... d. Fraud always involves a pressure or incentive to commit fraud, and a misappropriation of assets
Last Answer : The auditor’s interest in fraud consideration relates to fraudulent acts that cause a material misstatement of financial statements.
Description : Which of the following is true? a. Auditors are responsible for detecting all fraudulent financial reporting. b. Auditors must specifically consider fraud risk from overstating liabilities. c. Auditors must ... consider fraud risk from management override of controls. d. All of the above are true
Last Answer : Auditors must specifically consider fraud risk from management override of controls.
Description : Which of the following is an example of fraudulent financial reporting? a. The treasurer diverts customer payments to his personal due, concealing hisactions by debiting an expense account, thus ... the company and neglects to return them; the cost is reported as a miscellaneous operating expense
Last Answer : Company management changes inventory count tags and overstates ending inventory, while understating cost of goods sold
Description : Which of the following could be an example of fraud? a. Misappropriation of assets or group of assets. b. Errors in the application of the accounting principles. c. Clerical ... underlying the financial statements. d. Misinterpretation of facts that existed when financial statements were prepared.
Last Answer : Misappropriation of assets or group of assets
Description : Which of the following factors most likely would heighten an auditor's concern about the risk of fraudulent financial reporting? a. Large amounts of liquid assets that are easily ... of accounting principles. d. An overly complex organizational structure involving unusual lines of authority.
Last Answer : An overly complex organizational structure involving unusual lines of authority.
Description : Certain characteristics or circumstances may increase the susceptibility of assets to misappropriation. Opportunities to misappropriate assets increase due to the following except: a. Inventory items that ... which are small in size, marketable, or lacking observable identification of ownership.
Last Answer : Certain characteristics or circumstances may increase the susceptibility of assets to misappropriation. Opportunities to misappropriate assets increase due to the following except: a. Inventory items that ... which are small in size, marketable, or lacking observable identification of ownership.
Description : Which of the following is most likely to be considered a risk factor relating to fraudulent financial reporting? a. Low turnover of senior management. b. Extreme degree of competition within the ... various operating subsidiaries. d. Sales goals in excess of any of the preceding three years
Last Answer : Extreme degree of competition within the industry.
Description : Which of the following is most likely to be considered a risk factor relating to fraudulent financial reporting? a. Domination of management by top executives. b. Negative cash flows from operations. c. Large amounts of cash processed. d. Small high-dollar inventory items
Last Answer : Negative cash flows from operations.
Description : Why does a company choose to have an independent auditor report on its financial statements? a. Independent auditors will always detect management fraud. b. Independent auditors guarantee the accuracy ... . An independent audit is designed to search for deficiencies in the company's internal control
Last Answer : The company preparing the statements may have a vested interest in reporting certain results.
Description : Which of the following should the auditors normally interview as part of their assessment of fraud risk? a. Senior management b. Audit committee c. Various employees whose duties financial reporting responsibilities d. All of the given choices
Last Answer : All of the given choices
Description : Which of the following is least likely included in an auditor's inquiry of management while obtaining information to identify the risks of material misstatement due to fraud? a. Are financial reporting ... d. Has it reported to the audit committee the nature of the company's internal control?
Last Answer : Are financial reporting operations controlled by and limited to one location?
Description : Auditors would normally interview all but which of the following individuals as part of their assessment of fraud risk? a. Senior management b. Audit committee c. Various employees whose duties do not include normal financial reporting responsibilities d. All of the above
Last Answer : All of the above
Description : The risk of fraudulent financial reporting increases in the presence of a. Substantial increases in sales. b. Incentive systems based on operating income. c. Improved control systems. d. Frequent changes in suppliers.
Last Answer : Incentive systems based on operating income.
Description : Which of the following methods may be used to commit fraudulent financial reporting? a. Understate liabilities b. Fail to provide adequate disclosure c. Overstate revenues d. Each of the above can be used to commit fraudulent financial reporting
Last Answer : Each of the above can be used to commit fraudulent financial reporting
Description : Which of the following is an example of fraudulent financial reporting? a. Misappropriating collections on accounts receivable b. Using inappropriate assumptions in accounting estimate c. Stealing inventory d. Payments to fictitious employees or vendors
Last Answer : Using inappropriate assumptions in accounting estimate
Description : Which of the following statements reflects an auditor's responsibility for detecting misstatements due to errors and fraud? a. An auditor is responsible for detecting employee errors and simple fraud, ... due to errors and fraud unless the application of GAAS would result in such detection.
Last Answer : An auditor should design the audit to provide reasonable assurance of detecting misstatements due to errors and fraud that are material to the financial statements.
Description : Which of the following statements reflects an auditor's responsibility for detecting fraud and error? a. An auditor is responsible for detecting employee errors and simple fraud, but not for ... detecting errors and fraud unless the application of PSAs and PAPs would result in such detection
Last Answer : An auditor should design the audit to provide reasonable assurance of detecting errors and fraud that are material to the financial statements.
Description : The term used to refer to acts of omission or commission by the entity being audited, either intentional or unintentional, which are contrary to the prevailing laws and regulations is a. Misappropriation. b. Fraud. c. Illegal acts. d. Noncompliance
Last Answer : Noncompliance
Description : The ordinary examination of financial statements is not primarily designed to disclose defalcations and other irregularities although their discovery may result. Normal audit procedures are more likely to ... . Failure to record cash receipts for services rendered. d. Forgeries on company checks
Last Answer : Theft of inventories
Description : The ordinary examination of financial statements is not primarily designed to disclose defalcations and other irregularities although their discovery may result. Normal audit procedures are more likely to ... receipts for services rendered. c. Forgeries on company checks. d. Theft of inventories
Description : Which of the following actions would be an appropriate response by companies to improve the public's perception of their financial reporting? a. Requiring internal auditors to report all significant ... external and internal auditing work separated to maintain independence. d. None of the above.
Last Answer : Increased adoption of audit committees.
Description : In connection with the examination of financial statements, an independent auditor could be responsible for failure to detect a material fraud if a. Accountants performing important parts of the ... . The fraud was perpetrated by one client employee, who circumvented the existing internal control
Last Answer : The auditor planned the work in a hasty and inefficient manner.
Description : In connection with the examination of financial statements, an independent auditor could be responsible for failure to detect a material fraud if a. Statistical sampling techniques were not used on ... partsof the work failed to discover a close relationship between the treasurer and the cashie
Description : These refer to events or conditions that may indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. a. Fraud conditions b. Fraud risk factors c. Fraudulent activities d. Fraud events
Last Answer : Fraud risk factors
Description : In comparing management fraud with employee fraud, the auditor's risk of failing to discover the fraud is a. Greater for employee fraud because of the larger number of employees in ... existing internal controls. d. Greater for management fraud because managers are inherently smarter than employees.
Last Answer : Greater for management fraud because of management's ability to override existing internal controls
Description : In comparing management fraud with employee fraud, the auditor's risk of failing to discover the fraud is a. Greater for employee fraud because of the larger number of employees in the ... blue collar workers. d. Greater for management fraud because managers are inherently smarter than employees
Description : The primary factor that distinguishes errors from fraud is a. Whether the misstatement is perpetrated by an employee or by a member of management b. Whether the underlying cause of ... the underlying cause of misstatement relates to misapplication of accounting principles or to clerical processing
Last Answer : Whether the underlying cause of misstatement is intentional or unintentional.
Description : The auditor's defense of contributory negligence is most likely to prevail when a. Third party injury has been minimal. b. The client is privately held as contrasted with a public company ... statements. d. The auditor fails to detect fraud resulting from management override of the control structure
Last Answer : The auditor fails to detect fraud resulting from management override of the control structure
Description : The auditor's defense of contributory negligence is most likely to prevail when a. Third party injury has been minimal. b. The client is privately held as contrasted with a public company. ... . d. The auditor fails to detect fraud resulting from management override of the control structure.
Last Answer : The auditor fails to detect fraud resulting from management override of the control structure.
Description : Which of the following is correct concerning requirements about auditor's communications about fraud? a. Fraud that involves senior management should be reported directly to the audit committee ... . The auditor has no responsibility to disclose fraud outside the entity under any circumstances
Last Answer : Fraud that involves senior management should be reported directly to the audit committee regardless of the amounts involved
Description : The primary difference between financial statement errors and fraud is that a. Errors are intentional misstatements by management, while fraud involves unintentional mistakes or omissions. b. Errors are more ... misstatements. d. There is no difference as errors and fraud have the same meaning.
Last Answer : Errors are unintentional mistakes or omissions, while fraud involves intentional misstatements.
Description : An intentional act by one or more individuals among management, employees, or third parties which results in misrepresentation of financial statements refers to a. Illegal acts b. Error c. Fraud d. Noncompliance
Last Answer : Fraud
Description : The management responsibility to detect and prevent fraud and error is accomplished by a. Having an annual audit of financial statements. b. Implementing adequate quality control system. c. ... adequate accounting and internal control system. d. Issuing a representation letter to the auditor.
Last Answer : Implementing adequate accounting and internal control system
Description : For what reason does an independent auditor gather evidence? a. To assess management performance b. To detect fraud c. To detect misstatements d. To form an opinion on the financial statements
Last Answer : To form an opinion on the financial statements
Description : The reason an independent auditor gathers evidence is to a. Detect fraud b. Evaluate management c. Evaluate internal controls d. Form an opinion on the financial statements
Last Answer : Form an opinion on the financial statements
Description : When management refuses to disclose in the financial statements noncompliance to laws and regulations which are identified by the independent auditor, the CPA may be charged with unethical conduct for ... and regulations during the prior audits. d. Reporting these activities to the audit committee.
Last Answer : Issuing a disclaimer of opinion
Description : Management's attitude toward aggressive financial reporting and its emphasis on meeting projected profit goals most likely would significantly influence an entity's control environment when a. External ... d. The audit committee is active in overseeing the entity's financial reporting policies
Last Answer : Management is dominated by one individual who is also a shareholder
Description : The risk of material financial statement misstatement may be greater when the following conditions exist except a. When there is greater management intervention to specify the accounting treatment. ... for data collection and processing. d. Complex calculations or accounting principles is involved
Last Answer : When there is sufficient personnel with appropriate accounting and financial reporting skills
Description : Which of the following is an example of an assurance engagement? a. Management advisory services b. Reporting on financial statements prepared using other comprehensive basis of accounting. c. compilation of financial information d. preparation of tax returns
Last Answer : Reporting on financial statements prepared using other comprehensive basis of accounting.
Description : The purpose of an audit of financial statements is to a. Obtain an absolute level of assurance that the financial statements as a whole are free from material misstatement. b. Relieve management ... the future viability of the entity by expressing an opinion on the entity's financial statements.
Last Answer : Enhance the degree of confidence of intended users in the financial statements.
Description : Noncompliance with laws and regulations are also called a. Irregularities b. Illegal acts c. Misappropriation d. Defalcation
Last Answer : Illegal acts
Description : By providing high level of assurance on audit reports on financial statements, the auditor a. Guarantees the fair presentation of the financial statements. b. Confirms the accuracy of the ... financial statements. d. Assures the readers that fraudulent activities of employees have been detected.
Last Answer : Enhances the credibility of the financial statements.
Description : An independent audit aids in the communication of economic data because the audit a. Lends credibility to the financial statements. b. Confirms the accuracy of management's financial representation. ... . d. Assures the readers of financial statements that any fraudulent activity has been corrected
Last Answer : Lends credibility to the financial statements.
Description : Which of the following is an example of an error? a. Defalcation b. Misapplication of accounting policies. c. Suppression or omission of the effects of transactions from the records or documents. d. Recording of transactions without substance
Last Answer : Misapplication of accounting policies.
Description : The auditor's evaluation of the likelihood of material employee fraud is normally done initially as a part of a. The assessment of whether to accept the audit engagement. b. Understanding the entity's internal control structure. c. The Tests of Controls. d. The Tests of Transactions
Last Answer : Understanding the entity's internal control structure.
Last Answer : Understanding the entity's internal control structure
Description : The auditor is most likely to presume that a high risk of fraud exists if a. The client is a multinational company that does business in numerous foreign countries. b. The client ... perpetrate and conceal thefts. d. Inadequate employee training results in lengthy EDP exception reports each month
Last Answer : Inadequate segregation of duties places an employee in a position to perpetrate and conceal thefts
Description : The absence of which of the following internal controls increases the opportunity for fraud? a. Appropriate segregation of duties or independent checks b. Job applicant screening for employees with access to ... access to assets d. The absence of any of the above increases the opportunity for fraud
Last Answer : The absence of any of the above increases the opportunity for fraud
Description : Users of financial statements demand independent audit because a. Users demand assurance that fraud does not exist. b. Management may not be objective in reporting. c. Users expect auditors to correct management errors. d. Management relies on the auditor to improve internal control.
Last Answer : Management may not be objective in reporting