Auditing A Risk Based Approach to Conducting a Quality Audit 10Th Edition By Johnstone Test Bank

<< Anatomy And Physiology 7th Edition By PattonThibodeau Test Bank Anatomy And Physiology From Science to Life, 2nd Edition by Jenkins, Gail Test Bank >>
Product Code: 222
Availability: In Stock
Price: $24.99
Qty:     - OR -   Add to Wish List
Add to Compare

Auditing A Risk Based Approach to Conducting a Quality Audit 10Th Edition By Johnstone Test Bank

Description

WITH ANSWERS
Auditing A Risk Based Approach to Conducting a Quality Audit 10Th Edition By Johnstone Test Bank

chapter 2

1. The auditor is not responsible for the presentation of financial statements; therefore, the auditor has no responsibility for fraud in the financial statements.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Auditors Responsibility to Detect Fraud

 

2. An example of fraudulent financial reporting is the CFO intentionally overstating sales to boost profits.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Types of Frauds

 

3. The auditor is responsible for actively considering fraud risks in order to obtain reasonable assurance that the financial statements are free of material fraud.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   User Expectations of Auditor Responsibility

 

4. Auditors need to consider fraud arising from misappropriation of assets and fraudulent financial reporting.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Types of Frauds

 

5. Fraud is an intentional act involving the use of deception that results in a material misstatement of the financial statements.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Types of Frauds

 

6. An example of fraudulent financial reporting is the treasurers diversion of hundreds of thousands of dollars into a personal money market account.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Types of Frauds

 

7. BruceCo. has accounted for the revenue of Jiffy Mac, Inc., one of its suppliers as though it were its subsidiary. BruceCo. has probably committed fraud because of its misapplication of consolidation principles.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Types of Frauds

 

8. Consideration of fraud in financial statement audits is a relatively new concept derived originally from the Sarbanes-Oxley Act.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   User Expectations of Auditor Responsibility

 

9. The most important lesson to be learned from The Great Salad Oil Swindle is that auditors can commit fraud by falsely including inventory that does not exist.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Types of Frauds

 

10. The onslaught of fraud in financial statements over the recent decade has been the first of its kind in history.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   User Expectations of Auditor Responsibility

 

11. The fraud triangle requires the auditor to actively consider and assess the risk of fraud for clients and their financial statements.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   User Expectations of Auditor Responsibility

 

12. Fraud detection procedures should only be performed for clients that have had fraud problems in the past.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Auditors Responsibility to Detect Fraud

 

13. If an auditor discovers evidence of fraud, the planned audit procedures should be adjusted accordingly.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Auditors Responsibility to Detect Fraud

 

14. Professional skepticism is required on audit engagements that have a high risk of fraud but can be disregarded for all other engagements.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Auditors Responsibility to Detect Fraud

 

15. According to professional audit standards, the audit team should assemble early in the planning stages of an audit to conduct a fraud brainstorming meeting in order to determine the types of fraud that may occur with the client.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Fraud Risk Assessment and Detection Procedures

 

16. Rationalization is one element of the Fraud Triangle.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
LEARNING OBJECTIVES:   AUDT.JOHN.16.02-01 LO: 02-01
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Fraud Defined

 

17. Once the fraud assessment is complete in the planning stage, the auditor need not consider fraud further.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Fraud Risk Assessment and Detection Procedures

 

18. Pressure upon management to manipulate financial information is a common characteristic in fraud cases.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Auditors Responsibility to Detect Fraud

 

19. Management compensation that is tied to profits may create incentives to commit fraud.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Identify Fraud Risk Indicators

 

20. Management may feel pressure to maintain debt covenants, which is a deterrent to fraud.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Identify Fraud Risk Indicators

 

21. Audit procedures to detect fraud are generally an expansion of normal audit procedures.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
LEARNING OBJECTIVES:   AUDT.JOHN.16.02-03 LO: 02-03
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Recent History of Fraudulent Financial Reporting

 

22. Complex transactions such as derivative instruments provide management certain opportunities to manipulate financial statements to its advantage.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Identify Fraud Risk Indicators

 

23. A board of directors that is actively involved in monitoring management mitigates opportunities to commit fraud.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Identify Fraud Risk Indicators

 

24. Rationalization involves the mindset of the fraudster to justify committing the fraud.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Identify Fraud Risk Indicators

 

25. The auditor should not consider that fraud is present in revenue accounts because revenue is not typically a very complex account.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
LEARNING OBJECTIVES:   AUDT.JOHN.16.02-03 LO: 02-03
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Recent History of Fraudulent Financial Reporting

 

26. Management always uses journal entries to commit fraud because they are not reviewed by auditors.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Identify Fraud Risk Indicators

 

27. Auditors must keep a questioning mind when analyzing management responses to inquiry and auditors should strive to obtain corroborating evidence before accepting the management responses.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Identify Fraud Risk Indicators

 

28. The auditor must perform a brainstorming session with client management in order to plan the procedures to be performed.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Identify Fraud Risk Indicators

 

29. According to the PCAOB, the detection of material fraud is a reasonable expectation of users of audited financial statements.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Identify Fraud Risk Indicators

 

30. One fraud risk factor includes the presence of domineering members of management who seek the ultimate loyalty of subordinates.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Identify Fraud Risk Indicators

 

31. The audit team should develop its own ideas about how fraud may be performed by the client and then covered up.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Linking Fraud Risk to Audit Procedures

 

32. Audit tests do not relate to fraud testing because testing for fraud is conducted in a separate engagement.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Linking Fraud Risk to Audit Procedures

 

33. When the risk of fraud is high in financial statements, the auditor should assign less experienced auditors to the engagement.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Linking Fraud Risk to Audit Procedures

 

34. Various types of ways that fraud could be perpetrated should be hypothesized by the auditor prior to conducting audit testing.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Linking Fraud Risk to Audit Procedures

 

35. When fraud risk is great in the organization under audit, procedures applied are likely to be more extensive.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Linking Fraud Risk to Audit Procedures

 

36. The Sarbanes-Oxley Act significantly enhanced criminal penalties for crimes involving the destruction or alteration of corporate audit records.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
LEARNING OBJECTIVES:   AUDT.JOHN.16.02-05 LO: 02-05
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   The Sarbanes-Oxley Act of 2002

 

37. During the time period of 1998 to 2007, the median size of public company perpetrating fraud rose tenfold to $100 million (as compared to the previous ten years).

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Types of Frauds

 

38. According to COSO studies, the majority of the frauds took place at companies that were listed on the Over-The-Counter (OTC) market, rather than those listed on the NYSE or NASDAQ.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Types of Frauds

 

39. Auditors are responsible to fraud even if it has an immaterial effect on the financial statements.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Major Frauds and Audit Procedures

 

40. The landmark Enron fraud in the early 2000s involved the movement of significant debt off the books to related, unconsolidated entities.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Major Frauds and Audit Procedures

 

41. Successful corporate governance depends upon successful management of the company, as management has the primary responsibility for creating a culture of performance with integrity and ethical behavior.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Fraud Risk Indicators

 

42. Transparency is a desirable, but not critical, element of effective corporate governance.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Identify Fraud Risk Indicators

 

43. The auditor has a responsibility to design the audit to provide absolute assurance of detecting material fraud.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Auditors Responsibility to Detect Fraud

 

44. According to the Sarbanes-Oxley Act, the audit committee must have at least 3 independent members..

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
LEARNING OBJECTIVES:   AUDT.JOHN.16.02-05 LO: 02-05
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   The Sarbanes-Oxley Act of 2002

 

45. The auditor can be satisfied with less than persuasive evidence in the audit process because of the belief that management is honest.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Linking Audit Procedures and to Fraud Risk

 

46. Professional skepticism involves such things as questioning and corroborating management responses to inquiries and determining the authenticity of documents.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Professional Skepticism

 

47. The objective of financial reporting is to provide useful information to interested users.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Corporate Governance and Auditing

 

48. Corporate governance is a process by which the owners, but not the creditors, exert control and require accountability for the resources entrusted to the organization.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Corporate Governance and Auditing

 

49. The audit committee is a subcommittee of the board of directors comprised of independent outside directors.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Enhanced Role of Audit Committees

 

50. Implementing an effective ethical environment is primarily the responsibility of the audit committee of the Board of Directors.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
LEARNING OBJECTIVES:   AUDT.JOHN.16.02-06 LO: 02-06
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Required Audit Firm Communication to the Audit Committee
Corporate Governance Responsibilities

 

51. Any major disagreement the auditor has with management should be discussed with the audit committee.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Required Audit Firm Communication to the Audit Committee

 

52. Managers of organizations are hired by Boards of Directors to perform responsibilities such as the implementation of internal control.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Corporate Responsibility for Financial Reporting

 

53. An audit must be performed by persons who can make sound judgments relating to complex accounting issues.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Generally Accepted Auditing Standards and IAASB Principles

 

54. The audit committee must be composed of outsiders such as the organizations attorney and audit partner.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Enhanced Role of Audit Committees

 

55. Management of companies should have the ability to hire and fire the external auditor.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Enhanced Role of Audit Committees

 

56. The audit committee should have the authority to hire and fire the external auditor.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Enhanced Role of Audit Committees

 

57. Formulating corporate strategy and risk management policy is primarily the responsibility of the Board of Directors.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
LEARNING OBJECTIVES:   AUDT.JOHN.16.02-06 LO: 02-06
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Improved Corporate Governance

 

58. Audit committees of publicly traded companies must establish whistleblowing mechanisms within the company.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Required Audit Firm Communication to the Audit Committee

 

59. Why is fraud detection an important part of the audit?

  a. Auditors are required to seek out and find all fraud, regardless of its magnitude.
  b. Auditors expect that management will make them aware of any fraud in the financial statements.
  c. Society expects that financial statements have not been materially misstated due to fraud.
  d. Society realizes that some fraud was not intended to be discovered by auditors.

 

ANSWER:   c
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Overview

 

60. One of the primary goals of the PCAOB is to restore confidence in which group?

  a. The SEC..
  b. Boards of Directors.
  c. Internal auditors.
  d. Independent auditors..

 

ANSWER:   d
POINTS:   1
LEARNING OBJECTIVES:   AUDT.JOHN.16.02-04 LO: 02-04
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   An Overview of the Auditors Fraud-Related Responsibilities

 

61. Which of the following represents the size of company that has historically committed fraudulent financial reporting or that has experienced asset misappropriation by its employees?

  a. Large corporations.
  b. Middle-market corporations.
  c. Small and start-up companies.
  d. All companies.

 

ANSWER:   d
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Magnitude of Fraud

 

62. What is the primary determinant in the difference between fraud and errors in financial statement reporting?

  a. The materiality of the misstatement.
  b. The intent to deceive.
  c. The level of management involved.
  d. The type of transaction affected.

 

ANSWER:   b
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Types of Frauds

 

63. Which of the following statements reflects an auditors responsibility for detecting
fraud?

  a. An auditor is not responsible for discovering fraudulent acts involving employee collusion.
  b. The audit should be planned to detect only fraud caused by departures from GAAP.
  c. An auditor is only responsible for detecting fraudulent financial reporting.
  d. An auditor should design the audit to provide reasonable assurance of detecting
errors and fraud that are material to the financial statements.

 

ANSWER:   d
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Auditors Responsibility to Detect Fraud

 

64. Which of the following best represents fraud related to financial reporting?

  a. The transfer agent issues 40,000 shares of the companys stock to a friend without authorization by the board of directors.
  b. The controller of the company decreases warranty expense by $3 million because the company will otherwise miss analysts expectations this quarter.
  c. The in-house attorney receives payments from the French government for negotiating the development of a new plant in Paris.
  d. The accounts receivable clerk covers up the theft of cash receipts by writing off older receivables without authorization.

 

ANSWER:   b
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Types of Frauds

 

65. According to professional auditing standards, which of the following best represents a type of fraudulent financial reporting?

  a. Management accrues a liability and discloses the possible outcome of a lawsuit prior to settling the matter.
  b. Management reclassifies a negative cash balance by decreasing cash and increasing a current liability.
  c. Management discloses its failure to meet loan covenants but states that a waiver has been received.
  d. Management intentionally excludes a subsidiary from its consolidated results that it controls significantly.

 

ANSWER:   d
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Types of Frauds

 

66. What type of fraud occurs when the deposits of current investors are used to pay returns on the deposits of previous investors with no real investment happening?

  a. Skimming.
  b. Ponzi Scheme
  c. Channel Stuffing.
  d. Payroll Fraud.

 

ANSWER:   b
POINTS:   1
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Types of Frauds

 

67. Which of the following actions was a key element of the Enron audit fraud?

  a. Capitalizing line costs rather than expensing them.
  b. Misrepresenting bribes from suppliers as a reduction of operating costs.
  c. Shifting debt to off-balance sheet special entities.
  d. Concealing large losses related to securities investments.

 

ANSWER:   c
POINTS:   1
LEARNING OBJECTIVES:   AUDT.JOHN.16.02-03 LO: 02-03
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Recent History of Fraudulent Financial Reporting

 

68. Which of the following is a stated principle of a NYSE report identifying key core governance principles?

  a. Members of the Board of Directors should be primarily independent members.
  b. Effective corporate governance should be viewed as a compliance obligation.
  c. Effective corporate governance should be integrated with the companys business strategy.
  d. The Board of Directors has the primary responsibility for creating a culture of integrity and ethical behavior.

 

ANSWER:   c
POINTS:   1
LEARNING OBJECTIVES:   AUDT.JOHN.16.02-06 LO: 02-06
NATIONAL STANDARDS:   United States BUSPORG: Analytic
STATE STANDARDS:   United States AK AICPA BB-Critical thinking
TOPICS:   Improved Corporate Governance

 

69. Which of the following is a specific corporate governance responsibility of Executive Management?

  a. Approving major changes, such as mergers..

Write a review

Your Name:


Your Review: Note: HTML is not translated!

Rating: Bad           Good

Enter the code in the box below:



 

Once the order is placed, the order will be delivered to your email less than 24 hours, mostly within 4 hours. 

If you have questions, you can contact us here