Fraud Risk

Question 1

What are unintentional misstatements or omissions?

Answer 1

Error

Question 2

What is an intentional act by one or more individuals?

Answer 2

Fraud

Question 3

What are the 3 types of fraud?

Answer 3

Fraudulent financial reporting, misappropriation of assets, and corruption

Question 4

What involves intentional misstatements or omissions of amounts or disclosures in the financial statements that are designed to deceive financial statement users?

Answer 4

Fraudulent financial reporting

Question 5

What involves theft of an entity’s assets?

Answer 5

Misappropriation of assets

Question 6

What are the 3 fraud risk factors?

Answer 6

Incentives/Pressures, opportunity, and rationalization

Question 7

What is a discussion topic among Engagement Personnel?

Answer 7

Consideration of the risk of management override of controls

Question 8

What are the procedures used to obtain information useful in identifyying potential fraud risks?

Answer 8

Inquire of entity personnel regarding their views of fraud risk, consider the results of analytical procedures, and evaluate fraud risk factors

Question 9

When is analytical procedures required during?

Answer 9

Planning and final review stage

Question 10

Does lack of observation of any or all of the three fraud risk factors imply that there is no fraud risk?

Answer 10

No

Question 11

What are the 4 attributes of risk?

Answer 11

Type, significance, likelihood, and pervasiveness

Question 12

There is a presumption in every audit that what two risks exist?

Answer 12

Improper revenue recognition and management override of controls

Question 13

What are the other 2 considerations for identifying risks?

Answer 13

Size, complexity, and ownership characteristics of the entity and susceptibillity of items to manipulation

Question 14

The auditor is required to respons to the results of the fraud risk assessment on what 3 levels?

Answer 14

Overall General response, response encompassing specific audit procedures, and response addressing risks related to management override

Question 15

The auditor should consider the overall fraud risk when?

Answer 15

Assigning personnel to the engagement, supervision, management’s selection and application of accounting principles, and unpredictability in the selection of auditing procedures

Question 16

The following procedures should be performed to address the risk of management override of controls?

Answer 16

Examine journal entries and other adjustments, review accounting estimates for biases, and evaluate the business purpose for significant unusual transactions

Question 17

What are conditions identified during fieldwork that may affect the assessment of fraud risk?

Answer 17

Discrepancies in the accounting records, conflicting or missing evidential matter, problematic relationships between the auditor and management, objections by management to the auditor meeting privately with the audit committee, accounting policies that appear inconsistent with industry practices, frequent changes in accounting estimates, and tolerance of violations of the company’s code of conduct

Question 18

Who should the auditor discuss fraud that causes a material misstatement of the financial statements with?

Answer 18

Senior management and reported directly to those charged with governance

Question 19

Who should the auditor discuss fraud involving senior management with?

Answer 19

Those charged with governance

Question 20

A duty disclose fraud outside the entity exist?

Answer 20

To comply with certain legal and regulatory requirements, to a successor auditor, response to a subpoena, a funding agency or other specified agency in accordance with requirements for receiving governmental financial assistance, and to authorities

Question 21

Is complete documentation of the auditor’s risk assessment and response required?

Answer 21

Yes

Question 22

Does an auditor need documentation for not identifying improper revenue recognition as a fraud risk?

Answer 22

Yes