Ch. 6 HW Flashcards
- Independent auditors of financial statements and fraud examiners approach their work differently.
True
False
True
- It is always good control to have the bookkeeper prepare a list of cash receipts and then have the bookkeeper record it immediately in the
accounts.
True
False
False
- Fidelity bonds are used to prevent embezzlement.
True
False
False
- The use of confirmations for cash balances is still considered a generally accepted audit procedure.
True
False
True
- It is not necessary to send confirmations on accounts that a company represents as closed during the year to get the bank to confirm zero
balances.
True
False
False
- The client should request the bank to send a cutoff bank statement directly to the auditor.
True
False
True
- Fraud consists of unintentional misstatements or omissions in financial statements.
True
False
False
- Fraud examiners are more interested in evaluating internal control weaknesses rather than strengths.
True
False
True
- Psychotic motivation is characterized by the habitual criminal who steals for the sake of stealing.
True
False
True
- Control systems enhance trust and reduce the bureaucracy of business.
True
False
False
- The most effective long-run prevention of fraud lies in the practice of tight management controls over people.
True
False
False
- Many observers would say that one key to integrity in business is “accountability.”
True
False
True
- Employee fraud almost always involves people at the top executive level.
True
False
False
- An organization can prevent all fraud if its auditors are acquainted with some detection techniques.
True
False
False
- The chain of custody is the crucial link of evidence to the fraud suspect.
True
False
True
- Fraud awareness auditing includes “thinking like a crook” to imagine ways and means of stealing.
True
False
True
- Employee fraud is an intentional act that injures investors or creditors through materially misleading financial statements.
True
False
False
- The company’s bank reconciliation is a critical means by which an auditor completes audit procedures over the cash balance in the financial
statements.
True
False
True
- One of the main requirements under GAAS relating to fraud in a financial statement audit is that auditors obtain evidence about the intent of
the persons responsible for the fraud.
True
False
False
- The phases of employee fraud does not include the
A. Cover-up.
B. Conversion of money to fraudster’s use.
C. Fraudulent act.
D. Prosecution.
Prosecution.
- An internal control questionnaire for evaluating the completeness objective of cash receipts would not include which of the following
questions?
A. Are prenumbered sales invoices or receipt books used?
B. Does a responsible person approve discounts taken by customers with payments on account?
C. Are current receipts controlled by mechanical devices?
D. Does the person who opens the mail make a list of cash received?
Does a responsible person approve discounts taken by customers with payments on account?
- The characteristics of people who commit the largest frauds would not include
A. access to largest amounts of money.
B. long tenure with organization.
C. power to override controls.
D. employees that hold positions with little or no authority
employees that hold positions with little or no authority
23. The auditors' information source for vouching the bank reconciliation items is the A. standard bank confirmation. B. bank statement at audit date. C. accounting journal at year end. D. cutoff bank statement.
cutoff bank statement.
24. The probability of fraud is not a function of A. opportunity. B. predication. C. motive. D. a person’s lack of integrity.
predication.
- The assertions by management regarding the cash accounts in the financial statements include all of the following except
A. cash in all accounts exists in the name of the company.
B. proper internal control activities exist for all cash accounts.
C. all restrictions on the use of cash are disclosed.
D. cash balance properly reflect all cash on hand, in transit or, on deposit with third parties.
proper internal control activities exist for all cash accounts.
- A practice that would not encourage fraud would include
A. insisting that everything be documented with a rule for everything.
B. due consideration of pressure put on employees in the work place.
C. making profits the only measure of success for employees.
D. centralizing authority exclusively in top management.
due consideration of pressure put on employees in the work place.
- Which question would be inappropriate when asking questions of personnel during a regular audit?
A. Is there any information you would like to furnish regarding possible fraud within this organization?
B. Do you think fraud is a problem for business in general?
C. Do you think this company has any particular problem with fraud?
D. In your department, exactly who has the potential for committing fraud?
In your department, exactly who has the potential for committing fraud?
- The standard format for an audit approach for fraud cases would not include
A. audit of financial statement balances.
B. discovery summary for law enforcement officials.
C. test of controls activities.
D. paper trail.
paper trail.
29. Information about criminal rackets, convicts and their operations, and reputations of local businesses can be found at the A. Better Business Bureau. B. Securities and Exchange Commission. C. Police and Drug Enforcement Agency. D. Standard & Poor Registers.
Better Business Bureau.
30) For each of the descriptions in Column A, match the correct word or words from Column B.
A) Drives people to steal to achieve more personal prestige.
Egocentric motive
30) For each of the descriptions in Column A, match the correct word or words from Column B.
B) Helping attorneys document cases
Litigation support
30) For each of the descriptions in Column A, match the correct word or words from Column B.
C) The “relevance” of evidence
Chain of custody
30) For each of the descriptions in Column A, match the correct word or words from Column B.
D) A habitual criminal.
Psychotic motive
30) For each of the descriptions in Column A, match the correct word or words from Column B.
E) A proactive approach to detect financial fraud.
Fraud auditing
30) For each of the descriptions in Column A, match the correct word or words from Column B.
F) Application of accounting and auditing skills to the law and criminal cases.
Forensic accounting
30) For each of the descriptions in Column A, match the correct word or words from Column B.
G) The need for money.
Economic motive
30) For each of the descriptions in Column A, match the correct word or words from Column B.
H) A reason to believe fraud occurred.
Predication
30) For each of the descriptions in Column A, match the correct word or words from Column B.
I) A change in habits.
Red flag
30) For each of the descriptions in Column A, match the correct word or words from Column B.
J) Net worth analysis.
Extended procedure
