MULTIPLE CHOICE QUESTIONS (14 points)

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1. Which is the least true of the following statements?

a. Accounting errors are always unintentional,
b. Fraud consists of knowingly making material misrepresentation of fact, with the intention of inducing someone to believe the
falsehood and act on it.
c.The definition of fraud accompanies all means by which people can lie, cheat, steal, and dupe other people.
d. Concealment of a crime is an attribute of fraud.

2. Which of the following least describes segregation of duties?

a. authorization for a transaction is separate from the processing of the transaction.
b. asset custody is separate from record keeping
c. minimizes collusion
d. override by a higher authority

3. The most probable reason why separation of duties is no longer followed in an IT environment.
a. It would be inefficient and contrary to the objectives of automation
b. It is operationally futile.
c. The reason for segregation in a manual environment is to control some negative aspects of human behavior
d. Computers do not make errors, it’s the people.

4. Which is not true of the following statements?

a.The risk of not detecting a material misstatement resulting from fraud is higher than the risk of not detecting a material misstatement
resulting from error
b.The risk of the auditor not detecting a material misstatement resulting from management fraud is greater than for employee fraud,
c.The discovery of a material misstatement of the financial statements resulting from fraud does not, in itself, indicate a failure to
comply with PSAs
d. Discovery of fraudulent transactions depends on the preparation and skill of the auditors

5. This is not an objective of internal control

a.to safeguard assets of the firm
b.to ensure compliance with the requirement of regulatory agencies.
c. to ensure the accuracy and reliability of accounting records and information.
d.to promote efficiency in the firm’s operations.

6. In cases where an auditor discovers shady or illegal practices done by the client, the following are the actions that can be done by
the auditor except one. Which one is this?
a. issue a modified or qualified report
b. withdraw from the engagement
c. issue a regular report
d. blow the whistle

7. Which is not true of the following statements?

a. Fraud is deliberate, errors are not.
b. A deliberate failure to record transactions is not fraud
c. Some computer systems maintain no source documents.
d. While the auditors may be able to identify potential opportunities for fraud to be perpetrated, it is difficult for the auditor to
determine whether misstatement in judgment areas such as accounting estimates are caused by fraud or error.

8. Which of the following does not refer to audit trail?

a. journals and ledgers
b. pointers, hashing techniques, indexes or imbedded keys
c. price catalogues
d. sales invoice
9. Which of the following statements about fraud is correct?
a. A common form of fraud at the information gathering stage is to steal, misdirect, or misuse computer output.
b. Scavenging involves searching through the trash cans of the computer center for discarded output.
c. A perpetrator cannot obtain useful information from the carbon sheets removed from multi-parts report or from paper reports that
were rejected during processing.
d. Eavesdropping involves listening to output transmissions over telecommunication lines.

10. This is not a limitation of an effective internal control system.

a. possibility of error
b. lack of management support
c. management override
d. circumvention

11. Which form of access control does not belong here?

a. passwords
b. locks, safes, fences
c, electronic and infrared alarm systems
d. security guards

12. Which of the following is not a fraud related to asset misappropriation?

a. charges to expense accounts
b. Lapping
c. Transaction fraud
d. deposit in transit

13. Distribution of fraudulent paychecks to non-existent employees is an example of this fraud

a. transaction fraud
b. computer fraud
c. operation fraud
d. data processing fraud

14. Which of these is not considered independent verification done to identify errors and misrepresentations?
a. reconciling batch totals at points during transaction processing.
b. comparing physical assets with accounting records.
c. Preparing bank reconciliation
d. Reconciling subsidiary accounts with control accounts.