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Chapter 2 Homework
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Perguntas do quiz (30)
1Which of the following best represents fraud related to financial reporting?
- AThe in-house attorney receives payments from the French government for negotiating the development of a new plant in Paris.
- BThe controller of the company decreases warranty expense by $3 million because the company will otherwise miss analysts' expectations this quarter.
- CThe accounts receivable clerk covers up the theft of cash receipts by writing off older receivables without authorization.
- DThe transfer agent issues 40,000 shares of the company's stock to a friend without authorization by the board of directors.
2According to professional auditing standards, which of the following best represents a type of fraudulent financial reporting?
- AManagement reclassifies a negative cash balance by decreasing cash and increasing a current liability.
- BManagement intentionally excludes from its consolidated results a subsidiary that it controls significantly.
- CManagement discloses its failure to meet loan covenants but states that a waiver has been received.
- DManagement accrues a liability and discloses the possible outcome of a lawsuit prior to settling the matter.
3What 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?
- AChannel Stuffing
- BOff-Balance Sheet Fraud
- CSkimming
- DPonzi Scheme
4Which of the following is an example of fraud?
- AAn incorrect accounting estimate arising from misinterpretation of facts.
- BA mistake in the application of accounting principles.
- CMisappropriation of an asset.
- DA mistake in processing accounting data.
5What is the primary determinant in the difference between fraud and errors in financial statement reporting?
- AThe type of transaction affected.
- BThe materiality of the misstatement.
- CThe intent to deceive.
- DThe level of management involved.
6Which of the following frauds is most common?
- AManagement's theft of cash held in reserve accounts.
- BOver-recording expenses related to stock options.
- CMisapplication of revenue recognition principles.
- DChief financial officer’s misappropriation of funds.
7The fraud triangle identifies three elements that are generally present in the client’s organization when fraud occurs. Which of the following is not one of those elements?
- AProfessional skepticism
- BIncentives
- COpportunity
- DRationalization
8Which of the following is a common incentive or condition that increases the likelihood for fraudulent financial reporting?
- AAccess to undeposited cash
- BIneffective segregation of assets
- CManagement bonuses based on reported earnings
- DSignificant related party transactions
9Management of Premium Discovery Company is compensated through large salaries, stock options, and bonuses tied to the company's working capital growth. The CEO is constantly holding meetings to ensure that management is on target for increased operating income each month. Based solely on the preceding information, which element of the fraud triangle exists at the Premium Discovery Company?
- AIncentive
- BOpportunity
- CRationalization
- DExpectation
10Sam Jones, controller of Mitnikco, spends three days researching the accounting standards to find loopholes in the "rules" and to make a case for recognizing revenue earlier, rather than in later years. In the end, Sam and the other members of management determine that they will reduce the company's deferred revenue accounts and begin accounting for all revenues as agreements are signed. Based solely on the preceding information, which element of fraud is represented by the actions of Mitnikco management?
- APressures
- BSkepticism
- COpportunity
- DRationalization
11The fraud triangle has three elements. Which of the elements must be present for a fraud to occur?
- AAll elements must be present for fraud to occur.
- BAt least two of the three elements must be present for fraud to occur.
- CFraud can occur if any one of the elements is present.
- DNone of the above.
12Who is most often involved in perpetrating fraudulent financial reporting?
- AThe auditors and the attorneys.
- BThe shareholders and the chief operating officer.
- CThe treasurer and the board of directors.
- DThe chief executive and chief financial officer.
13What is the best way an auditor can detect fraud in the financial statements?
- ABrainstorm with the client to find the types of fraud occurring.
- BActively search for errors in the financial statements.
- CUnderstand Generally Accepted Accounting Standards.
- DUse professional skepticism.
14Which of the following best describes professional skepticism?
- AA questioning mind
- BA firm commitment to auditing standards and ethics
- CAn intent to deceive
- DAn attitude of intrusion and obstinacy
15Why is fraud detection an important part of the audit?
- AAuditors are required to seek out and find all fraud, regardless of its magnitude.
- BSociety expects that financial statements have not been materially misstated due to fraud.
- CAuditors expect that management will make them aware of any fraud in the financial statements.
- DSociety realizes that some fraud was not intended to be discovered by auditors.
16One of the primary goals of the PCAOB is to restore confidence in which group?
- AIndependent auditors
- BThe SEC
- CBoard of directors
- DInternal auditors
17Which of the following statements reflects an auditor’s responsibility for detecting fraud?
- AAn auditor is only responsible for detecting fraudulent financial reporting.
- BThe audit should be planned to detect only fraud caused by departures from GAAP.
- CAn auditor is not responsible for discovering fraudulent acts involving employee collusion.
- DAn auditor should design the audit to provide reasonable assurance of detecting errors and fraud that are material to the financial statements.
18How must an auditor address fraud in the planning stage?
- AThe auditor must not be aggressive in its initial approach to fraud, as trust may be lost by the client.
- BThe auditor must consider the likelihood of fraud existing in the company in the planning stage.
- CThe auditor must test for fraud in the planning stage by sampling accounts.
- DThe auditor must realize that most people are honest and not automatically assume that fraud exists when planning the audit.
19What should an audit team do when it discovers that fraud risk factors are present on an audit engagement?
- AWithdraw from the engagement and inform regulatory bodies.
- BReduce the amount of evidence required and resort to management inquiry.
- CModify procedures to actively search for the existence of fraud.
- DTurn the audit over to forensic accountants.
20Which of the following best represents actions that may indicate fraud is pervasive throughout the company under audit?
- AThe company's management negotiates deals with vendors in such a manner as to pay lower prices.
- BThe company's management estimates bad debts using an aged accounts receivables ledger rather than as a percent of sales.
- CThe company's management drives luxury vehicles and takes vacations to exotic places.
- DThe company's management takes an overly aggressive approach to revenue recognition.
21According to professional audit standards, how might auditors gain an understanding of the nature of fraud that may occur in the client organization?
- ADiscussions with other audit firms
- BCirculating a survey to the client company employees for completion.
- CFraud training courses from actual corporate fraud ex-criminals.
- DConducting a brainstorming session with the members of the audit team.
22There are many important reasons for diligent audit planning. If an audit firm wrongly skips the planning stage of an audit, what will be the effect relative to fraud detection?
- AThe firm will not be able to apply GAAP to the financial statements.
- BThe firm will not adequately identify the types of fraud that may occur in the client company.
- CThe firm will not be able to perform direct tests of account balances.
- DThe firm will lack the competency and technical training necessary to complete the audit in accordance with GAAS.
23Which of the following factors should an auditor consider in evaluating the effect of fraud upon the planned audit procedures?
- AThe type of fraud that may occur
- BThe potential materiality of fraud
- CThe likelihood of fraud occurring
- DAll of the above
24How did the Sarbanes-Oxley Act strengthen auditor independence?
- ABy requiring auditors to provide reports in accordance with the Foreign Corrupt Practices Act.
- BBy requiring auditors to report the nature of any auditor-client disagreements to the SEC.
- CBy requiring a different audit firm from the one that performs the audit to prepare the client’s tax return.
- DBy requiring the lead partner to rotate off the audit engagement at least every five years.
25Which of the following is a responsibility of the PCAOB?
- ATo set financial reporting standards for private companies.
- BTo set audit standards for private companies.
- CTo set audit standards for public companies.
- DTo set financial reporting standards for public companies.
26Under the Sarbanes-Oxley Act, which of the following services performed by registered accounting firms for their audit clients would not impair their independence?
- AInternal audit services
- BTax services
- CAppraisal services
- DSystems design
27Which of the following items are registered audit firms not required to report to the audit committee?
- AAlternative treatments of financial information within generally accepted accounting principles that have been considered by management, as well as the preferred treatment of the audit firm.
- BCritical accounting policies and practices.
- CSignificant written communications between the audit firm and management.
- DA list of all audit procedures performed
28Which of the following is a specific corporate governance responsibility of executive management?
- AApproving major changes, such as mergers.
- BReviewing the budget of the internal audit function.
- CApproving non-audit work performed by the audit firm.
- DImplementing an effective ethical environment.
29Which of the following is a specific governance responsibility of the board of directors of a public corporation?
- AManaging and reviewing operations.
- BSelecting the external audit firm.
- CImplementing effective internal controls.
- DApproving corporate strategy.
30Which of the following is not a specific responsibility of an audit committee as mandated by the NYSE?
- ACreating and implementing internal controls.
- BSetting hiring policies for former employees of the external auditor.
- CDiscussing the company’s financial statements with the external auditor.
- DDiscussing financial information provided to analysts.
Informações
- Descrição
- Chapter 2 Homework
- Autor
- Kayla Harbaugh
- Idioma
- English
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