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Chapter 2 - The Auditor's Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

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• The auditor is not responsible for the presentation of financial statements; therefore, the auditor has no

responsibility for fraud in the financial statements.

• True
• False

ANSWER: False

POINTS: 1

NATIONAL STANDARDS: United States - BUSPORG: Analytic

STATE STANDARDS: United States - AK - AICPA BB-Critical thinking

TOPICS: Auditor's Responsibility to Detect Fraud

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

ANSWER: True

POINTS: 1

NATIONAL STANDARDS: United States - BUSPORG: Analytic

STATE STANDARDS: United States - AK - AICPA BB-Critical thinking

TOPICS: Types of Frauds

• The auditor is responsible for actively considering fraud risks in order to obtain reasonable assurance that the

financial statements are free of material fraud.

• True
• 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

• Auditors need to consider fraud arising from misappropriation of assets and fraudulent financial reporting.
• True
• False

ANSWER: True

POINTS: 1

NATIONAL STANDARDS: United States - BUSPORG: Analytic

STATE STANDARDS: United States - AK - AICPA BB-Critical thinking

TOPICS: Types of Frauds

• Fraud is an intentional act involving the use of deception that results in a material misstatement of the

financial statements.

• True

Auditing A Risk Based-Approach to Conducting a Quality Audit 10th Edition Johnstone Test Bank Visit TestBankDeal.com to get complete for all chapters

Chapter 2 - The Auditor's Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

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• False

ANSWER: True

POINTS: 1

NATIONAL STANDARDS: United States - BUSPORG: Analytic

STATE STANDARDS: United States - AK - AICPA BB-Critical thinking

TOPICS: Types of Frauds

• An example of fraudulent financial reporting is the treasurer's diversion of hundreds of thousands of dollars

into a personal money market account.

• True
• False

ANSWER: False

POINTS: 1

NATIONAL STANDARDS: United States - BUSPORG: Analytic

STATE STANDARDS: United States - AK - AICPA BB-Critical thinking

TOPICS: Types of Frauds

• 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.

• True
• False

ANSWER: True

POINTS: 1

NATIONAL STANDARDS: United States - BUSPORG: Analytic

STATE STANDARDS: United States - AK - AICPA BB-Critical thinking

TOPICS: Types of Frauds

• Consideration of fraud in financial statement audits is a relatively new concept derived originally from the

Sarbanes-Oxley Act.

• True
• 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

• 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.

• True
• False

Chapter 2 - The Auditor's Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

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ANSWER: False

POINTS: 1

NATIONAL STANDARDS: United States - BUSPORG: Analytic

STATE STANDARDS: United States - AK - AICPA BB-Critical thinking

TOPICS: Types of Frauds

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

• The fraud triangle requires the auditor to actively consider and assess the risk of fraud for clients and their

financial statements.

• True
• 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

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

ANSWER: False

POINTS: 1

NATIONAL STANDARDS: United States - BUSPORG: Analytic

STATE STANDARDS: United States - AK - AICPA BB-Critical thinking

TOPICS: Auditor's Responsibility to Detect Fraud

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

ANSWER: True

POINTS: 1

NATIONAL STANDARDS: United States - BUSPORG: Analytic

STATE STANDARDS: United States - AK - AICPA BB-Critical thinking

Chapter 2 - The Auditor's Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

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TOPICS: Auditor's Responsibility to Detect Fraud

• Professional skepticism is required on audit engagements that have a high risk of fraud but can be

disregarded for all other engagements.

• True
• False

ANSWER: False

POINTS: 1

NATIONAL STANDARDS: United States - BUSPORG: Analytic

STATE STANDARDS: United States - AK - AICPA BB-Critical thinking

TOPICS: Auditor's Responsibility to Detect Fraud

• 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.

• True
• 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

• Rationalization is one element of the Fraud Triangle.
• True
• 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

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