Audit Quiz - Chapter 11

Question 1

Fraudulent financial reporting is an intentional misstatement or omission of amounts or disclosures with the intent to deceive users.

Answer 1

True

Question 2

Misappropriation of Assets is a form of Fraud.

Answer 2

True

Question 3

The opportunities for misappropriation of assets only exist in companies with weak internal controls.

Answer 3

False

Question 4

Inadequate separation of duties over assets is practically a license for employees to steal.

Answer 4

True

Question 5

Fraud is rare in small or not-for profit businesses.

Answer 5

False

Question 6

Auditors are to maintain professional skepticism and a questioning mind throughout the entire audit to identify fraud risks and to critically evaluate evidence.

Answer 6

True

Question 7

Management is responsible for implementing corporate governance and control procedures to minimize the risk of fraud, which can be reduced through a combina­tion of prevention, deterrence, and detection measures.

Answer 7

True

Question 8

Almost any employee in any company is capable of committing a dishonest act under the right circumstances.

Answer 8

True

Question 9

Internal audit plays a minute role in monitoring activities to ensure that antifraud programs and controls are operating effectively.

Answer 9

False

Question 10

A consistent slowing trend of accounts receivables with a corresponding consistent increase in sales is a strong direct indicator of fraud.

Answer 10

False

Question 11

As fraud risks increases, more experienced auditors should be employed.

Answer 11

True

Question 12

A company’s selection of a particular accounting policy does not lend itself to fraud risk.

Answer 12

False

Question 13

Auditors must perform procedures in every audit to address the risk of management override.

Answer 13

True

Question 14

The auditor’s assessment of the risks of material misstatement due to fraud is performed only at the beginning of the audit.

Answer 14

False

Question 15

Revenue Recognition is a significant fraud risk area for most audits.

Answer 15

True

Question 16

Fictitious Revenue causes a company’s gross margin to decrease.

Answer 16

False

Question 17

Decreasing Inventory turnovers could be a fraud risk indicator.

Answer 17

True

Question 18

Unrecorded Cash Sales are among the easiest for auditors to find.

Answer 18

False

Question 19

Increasing Accounts Receivable balances and increasing accounts receivable turnover are generally fraud risk indicators.

Answer 19

False

Question 20

If a cash sale is not included in the cash register it is almost impossible to detect the fraud.

Answer 20

True

Question 21

Fictitious Ending Inventory overstates cost of good sold and understates gross margin.

Answer 21

False

Question 22

Fictitious Inventory increases inventory turnover ratio.

Answer 22

False

Question 23

Inquiries of Fraud can be performed through a variety of approaches.

Answer 23

True

Question 24

All fraud materially impacts a company’s financial statements.

Answer 24

False