Fraud Risk

Question 1

what is a risk factor that relates to misstatements arising from misappropriation of assets

Answer 1

A lack of independent checks

Question 2

Analytical procedures are performed during

Answer 2

planning often use data aggregated at a high level.

Question 3

During an audit, the auditor should maintain an attitude of

Answer 3

professional skepticism, which includes a questioning mind and a critical assessment of audit evidence.

Question 4

The primary objective of the fraud brainstorming session

Answer 4

assess the potential for material misstatement due to fraud

Question 5

Errors are

Answer 5

unintentional

Question 6

Fraud is

Answer 6

intentional

Question 7

What are the three types of fraud

Answer 7

1. Fraudulent Financial Reporting - lying
2. Misappropriation of Assets - stealing
3. Corruption - cheating

Question 8

What are the characteristics of fraud ( Fraud Triangle )

Answer 8

1. Incentives / Pressure - reason
2. Opportunity - lack of Internal controls
3. Rationalization - reason to justify behavior

Question 9

What is the difference between mgt resp with fraud vs auditors

Answer 9

Mgt - to design and implement programs to detect fraud

Auditor - obtain reasonable assurance

Question 10

presumption of risk

Answer 10

1. improper revenue recognition

2. management override of controls

Question 11

when do auditors speak to parties outside the entity about fraud ?

Answer 11

1. to comply to regulatory
2. successor auditors
3. subpoena
4. specialized agency
5. authorities