Auditor 11-1515000503.txt

The flashcards below were created by user amw6437 on FreezingBlue Flashcards.

  1. two types of fraud
    Fradulent financial reporting, misappropriation of assets
  2. ________is an intentional misstatement or omission of amounts or disclosures with the intent to decieve users
    fraudulent financial reporting
  3. Because of financial risk of matieral misstatements due to fraud (fraud risk) an audit of FS in accordance with GAAS should be performed with an attitude of

    A. Independent intergrity
    B. Professional skepticism
    C. Objective judgment
    D. Impartial conservatism
    (this multiple choice question has been scrambled)
  4. Which of the following circumstances is most likely to cause an auditor to consider whether material misstatements due to fraud exist in an entity's FS?

    A. Significant deficiencies in internal control previously communicated to management have been corrected
    B. Transactions selected for testing are not supported by proper documentation
    C. The BOD oversees the financial reporting process and internal control
    D. Management places little empahsis on meeting earnings projections of external parties
    (this multiple choice question has been scrambled)
  5. Which of the following characteristics is most likely to heighten an auditors concern about the risk of material misstatements due to fraud in a entity's FS?

    A. Employees who handle cash receipts are not bonded
    B. The entity's industry is experiencing declingin customer demand
    C. The BOD is active in overseeing the entity's financial reporting policies
    D. Internal auditors have direct access to the board of directors and the entity's management
    (this multiple choice question has been scrambled)
  6. Which of the following circumstances is most likely to cause an auditor to increase the assessment of the rissk of material misstatment of the financial statements due to fraud?

    A. Property and equippment are usually sold at a loss before being fully depreciated
    B. Clerical errors are listed on a computer-generated exception report
    C. Unusual discrepancies exist between the entity's records and confirmation replies
    D. Monthly bank reconciliations usually include several in-transit items
    (this multiple choice question has been scrambled)
  7. When fraud risk factors are identified during an audit the auditor's documentation should include
    The risk factors identified---the auditors response to the risk factors identified
    A. No--Yes
    B. Yes--No
    C. No--No
    D. Yes--yes
    (this multiple choice question has been scrambled)
  8. If an independent audit leading to an opinion of FS causes the auditor to believe that a material misstatment due to fraud exists, the auditor should first

    A. Consider whether fraud was the result of a failure by employees to comply with existing controls
    B. Make the investigation necessary to determine whether fraud has actually occured
    C. Request that management investigate to determine whether fraud has actually occurred
    D. Consider the implications for other aspects of the audit and discuss the matter with the appropriate levels of management
    (this multiple choice question has been scrambled)
  9. As a result of analytical procedures, the auditor determines that the gross profit percentage has increased from 30% in the preceding year to 40% in the current year. The auditor should
    A. Increase the auditors assessment of the risk of revenue misstatements, including fraud
    B. Require footnote disclosure
    C. Document management's plans for maintaining this trend
    D. Evaluate management's performance in causing the improvement in gross profit
    (this multiple choice question has been scrambled)
  10. Cash recipets from sales on account have been missappropriated. Which of the following acts will conceal this embezzelment and be least likely to be deetected by the auditor?

    A. Understating the sales journal
    B. Overstating the AR susidiary records
    C. Overstating the AR control account
    D. Understating the cash reciepts journal
    (this multiple choice question has been scrambled)
  11. An auditor discovers that a client's AR turnover is substanitally lower for the current year than for the prior year. This trend may indicate that

    A. An employee has been lapping receivables in both years
    B. The client recently tightened its credit granting policies
    C. Employeed have stolen inventory just before year end
    D. Fictitious credit sales have been recorded during the year
    (this multiple choice question has been scrambled)
  12. Which of the following internal controls will best detect the theft of valuable items from an inventory that consists of hundreds of different items selling for $1 to $10 and a few items selling for hundreds of dollars?

    A. Maintain a perpetual inventory of only the more valuable items, with frequent periodic verification of the validitiy of the perpetual inventory records
    B. Require an authorized officers signinture on all requistions for the more valuable items
    C. Have an independent auditing firm examine and report on management's assertion about the design and operating effectiveness of the cotrol activities relevent to inventory
    D. Have seperate warehouse space for the more valuable items, with sequentially numbered tags
    (this multiple choice question has been scrambled)
  13. deliberate actions taken by management to meet earnings objectives
    Earnings management
  14. Form of earnings management in which revenues and expenses are shifted between periods to reduce flucuations in earnings
    Income smoothing
  15. ______is fraud that involves theft of an entity's assets
    Misappropriation of assets
  16. According to association of certified fraud examiners, the average company loses ______of its revenues to fraud
  17. Represents three conditions for fraud arising from fraudulent reporting and misappropriations of assets- referred to as
    Fraud triangle
  18. Three conditions of the fraud triangle
    • -Incentives/pressure
    • -Opportunities
    • -Attitudes/rationalization
  19. Mangement or other employees have incentives or pressures to commit fraud
  20. Circumstances provide opportunities for managment or employees to commit fraud
  21. An attitude, character, or set of ethical values exists that allows management or employees to commit a dishonest act, or they are in an environement that imposes sufficent pressure that causes them to rationalize committing a dishonest acts
  22. Entity factors that increase the risk of fraud
    Fraud risk factors
  23. When asked why exectutive fraud occurs, repondents overwhelming identify_____ and _____ as the top two reason
    • -Pressure to do "whatever it takes" to meet goals
    • -seek personal gain
    • Other factors from highest to lowest
    • -think "i wont get caught"
    • -they do not consider their actions fraudulent
    • -believe regulations are easily bypassed
    • -fear losing their job if goals are not met
    • - lack of resources causes corners to be cut
    • - lack of understanding of laws and regulations
  24. _____provides guidance to auditors in assessing the risk of fraud
    SAS 99
  25. An attitude of thee auditor that neither assumes management is dishonest nor assumes unquestioned honesty
    Professional skepticism
  26. During audit planning, the engagement team must discuss the need to maintain a _______throughout the audit to identify fraud risks and critically evaluate audit evidence
    Questioning mind
  27. Five sources of information to assess fraud risk
    • -Communications among audit team
    • -inquires of management
    • -risk factors
    • -analytical procedures
    • -other information
  28. SAS 99 requires the audit team to conduct discussions to share insight and to brainstorm ideas that address the following
    • - How and where they believe the entity's FS might be suspectible to material mistatement due to fraud (external and internal)
    • - how mangement could perpetrate and conceal fradulent financial reporting
    • - how anyone might misappropriate assests of entity
    • - how auditor might respond to suspectibility of material mistatement due to fraud
  29. SAS 99 requires auditors to make specific inquires of ______ and others within the company to provide information that otherwise might not be communicated
Card Set
Auditor 11-1515000503.txt
audit 11
Show Answers