Question 1

Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts

This question has been regraded.

Which of the following is a fraudulent financial reporting?

Embezzling receipts

Stealing physical assets or intellectual property

Using an entity’s assets for personal use

Manipulation of alteration of accounting records from which financial

statements are prepared

Question 2
Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts
This question has been regraded.

Which of the following best describes what is meant by the term “fraud
risk factor”?

Reportable conditions identified during an audit.

Factors whose presence indicates that the risk of fraud is high.

Factors whose presence requires the services of an expert.

Factors whose presence often has been observed in circumstances where

frauds have occurred.

Question 3
1 / 1 pts
Channel stuffing which is the forcing of more product deliveries to
customer more than what they can sell may most likely be what type
of fraud?

Occupational fraud

Misappropriation of asset

Fraudulent financial reporting

Corruption
Question 4
1 / 1 pts
The following are examples of fraud risk factors relating to
misstataments arising from misappropriation of assets except

Inadequate segregation of duties or independent checks.

Recurring negative cash flows from operating activities while reporting

earnings and earnings growth.

Adverse relationship between the entity and employees with access to cash
or other assets susceptibable to theft created by recent changes made to
employee compensation.

Inadequate physical safeguards over cash, inventory or fixed assets.

Question 5
Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts
This question has been regraded.

The auditor’s concern about the risk of material misstatement is least

likely to be increased if management

Is interested in inappropriate means of minimizing resported earnings for tax

purposes.
Commits to unduly aggressive forecasts.

Operating and financing decisions are made by numerous individuals.

Has an excessive interest in increasing the entity’s share price through the
application of unduly aggressive accounting practices.

Question 6
Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts
This question has been regraded.

The auditor may consider a fraud risk factor a situation in which the
profitability of the entity is

Consistent with the overall profitability of the industry.

Inconsistent with the overall profitability of the industry.

Not exactly equal with the overall profitability of the industry.

Exactly equal with the overall profitability of the industry.

Question 7
Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts
This question has been regraded.
The identified and assessed fraud risks should be used by the auditor
in designing the nature, timing and extent of his or her

Risk assessment procedures

Further audit procedures

Both Risk assessment procedures and Further audit procedures

Audit report

Question 8
Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts
This question has been regraded.

When the auditor encounters circumstances that may indicate that

there is a material misstatement in the financial statements resulting
from fraud or error, the auditor should perform procedures to
determine whether the financial statements are materially misstated.
The nature, timing and extent of the procedures to be performed would
depend on the auditor’s judgment as to the

A B C D

I. Type of fraud
or error No Yes Yes No
indicated

II. Likelihood of Yes No Yes No

occurence

III. Likelihood
that a particular
type of fraud or
error could have Yes No Yes No
a material effect
on the financial
statements

Question 9
Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts
This question has been regraded.

The auditor is concerned with fraud that causes a material

misstatement in the financial statements. Therea re two types of
fraud: fraudulent financial reporting and
Management fraud.

Employee fraud.

Misappropriation of assets.

Collusion within the entity or with third parties.

Question 10
Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts
This question has been regraded.

Under PSA 240, there is a rebuttable presumption of the risk of fraud in

which account?

Operating expenses

Cost of goods sold

Revenue

Finance cost

IncorrectQuestion 11
Original Score: 1 / 1 pts Regraded Score: 0 / 1 pts
This question has been regraded.

Which of the following is a required audit planning procedure

concerning potential fraud?

Consider whether estimates prepared and recorded by management could

indicate biased reporting.

Document the results of procedures used to address the risk of fraud.

Consider the nature of journal entries, particularly those made near the end
of the reporting period.

Conduct discussions among the members of the audit team regarding the
risks of material misstatement due to fraud or error.

Question 12
1 / 1 pts
The risk of not detecting a material misstatement resulting from fraud
is higher than the risk of not detecting one resulting from error
because

The auditor did not consider risk factors for accounts having a pervasive
effects on the financial statements.

Substantive audit procedures cannot detect material misstatements

resulting from fraud.

Fraud may involve sophisticated and carefully organized schemes designed

to conceal it, such as forgery, deliberate failure to record transactions, or
intentional misrepresentations being made to the auditor.

The auditor has no responsibility to identify and assess fraud risks in an

audit of the financial statements.

IncorrectQuestion 13
Original Score: 0 / 1 pts Regraded Score: 0 / 1 pts
This question has been regraded.

A fraud scheme where the perpetrator causes a company to pay too

much for ordered goods, or to pay for goods never ordered is called

Payroll fraud

Disbursement fraud
Cash receipts fraud

Inventory fraud

Question 14
1 / 1 pts
True or False:

I - Misclassifying financial assets due to wrong conclusions made

about the entity’s business model and cash flow characteristics is an
error rather than fraud.

II - Rate of change in the entity's industry is rapid is an example of a

fraud risk factor.

No, Yes

No, No

Yes, No
Yes, Yes

IncorrectQuestion 15
Original Score: 0 / 1 pts Regraded Score: 0 / 1 pts
This question has been regraded.

All of the following are indications of noncompliance. Which is not?

Payment of fines and penalties.

Payment for unspecified services to consultants or government officials and

employees.

The products of the client were featured in TV media.

Purchasing at prices significantly above or below the market price.

Question 16
Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts
This question has been regraded.

According to PSA 240, the primary responsibility for the prevention and
detection of frauds rests with
Those charged with governance of the entity only.

Management of the entity only.

Both those charged with governance of the entity and the management.

The auditor.

Question 17
Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts
This question has been regraded.

Which of the following conditions or events may create incentives or

pressures to commit fraud?

Inadequate system of authorization and approval of transactions

Lack of mandatory vacations for employees performing key control functions

Excessive pressure on management or operating personnel to meet financial

targets

Inadequate access controls over automated records

Question 18
Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts
This question has been regraded.

Opportunities to misappropriate assets increase when there are

Known or anticipated future employee layoffs.

Promotions, compensation or other rewards are inconsistent with

expectations.

Recent or anticipated changes to employee compensation.

Inventory items that are small in size, of high value, or in high demand.

Question 19
Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts
This question has been regraded.

Which of the following conditions are generally present when

misstatements due to fraud occur?

I. Incentive or pressure

II. Perceived opportunity

III. Rationalization

I and II only
II and III only

I and III only

I, II and III

Question 20
Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts
This question has been regraded.

True or False:

I - An example of a fraud risk factor that relates to industry conditions

is whem there is a high turnover of management, counsel or board
members.

II - Significant related party transactions which are not in the ordinary

course of business is an example of a fraud risk factor.

Yes, Yes

Yes, No
No, Yes

No, No

IncorrectQuestion 21
Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts
This question has been regraded.

Which of the following illustrates a pressure(s) to commit fraud?

Financial difficulties being experienced by client personnel.

Management is under pressure, from sources outside or inside the entity, to

achieve an expected (and perhaps unrealistic) earnings target.

Both a and b.

Large amounts of cash processed.

Both Financial difficulties being experienced by client personnel. and
Management is under pressure, from sources outside or inside the entity, to
achieve an expected (and perhaps unrealistic) earnings target.

Question 22
Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts
This question has been regraded.

Because of the risk of material misstatement, an audit of financial

statements in accordance with PSAs should be planned and performed
with an attitude of

Impartial conservatism

Objective judgment

Independent integrity

Professional skepticism

Question 23
Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts
This question has been regraded.
Which of the following circumstances would an auditor most likely
consider a risk factor relating to misstatements arising from
fraudulent financial reporting?

Several members of management have recently purchased additional shares

of the entity's stock.

Several members of the board of directors have recently sold shares of the
entity's stock.

The entity distributes financial forecasts to financial analysts that predict

conservative operating results.

Management is interested in maintaining the entity's earnings trend by using

aggressive accounting practices.

Question 24
1 / 1 pts
Marginal ability to meet stock exchange listing requirements or debt
repayment or other debt covenant requirements is a fraud risk factor
that relates to

Misappropriation of assets

Fraudulent financial reporting

Neither Fraudulent financial reporting nor Misappropriation of assets

Both Fraudulent financial reporting and Misappropriation of assets

IncorrectQuestion 25
0 / 1 pts
What is one common way to conceal a theft?

By the conversion of stolen assets into cash.

By stealing cash from customer A and then using customer B’s balance to
pay customer A’s accounts receivable.

By charging the stolen item to an expense account.

By creating cash through inter-bank cash transfers.

Question 26
Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts
This question has been regraded.

True or False:

I - An example of a fraud risk factor is when non-financial management

participates excessively in, or is preoccupied with, the selection of
accounting policies.
II - Recording transactions that have no commercial substance in
order to achieve certain financial results is merely an error rather than
fraud.

Yes, Yes

Yes, No

No, Yes

No, No

Question 27
Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts
This question has been regraded.

In a payroll fraud, funds can be stolen by

I. Paying a fictitious or ghost employee.

II. Increasing pay rates without authorization.

III. Keeping a real but terminated employee on the payroll.

I and II only
I and III only

II and III only

I, II and III

Question 28
Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts
This question has been regraded.

True or False:

I - Generally, fraud hidden in the financial statements is equally

difficult to detect as an error.

II - Employee fraud is more difficult to detect than management fraud.

Yes, Yes

Yes, No
No, Yes

No, No

Question 29
Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts
This question has been regraded.

Large amounts of liquid assets that are easily convertible into cash is
a fraud risk factor that relates to

Fraudulent financial reporting

Misappropriation of assets

Both Fraudulent financial reporting and Misappropriation of assets

Neither Fraudulent financial reporting nor Misappropriation of assets

Question 30
Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts
This question has been regraded.

Which of the following should be part of an auditor’s planning in an

audit of the financial statement?
Planning to search for errors or fraud that would have a material or
immaterial effect on the financial statements.

Planning to discover fraud for the purpose of fraud examination.

Planning to detect, on a conclusive basis, client’s irregularities.

Planning to identify and assess fraud risk factors that could result to
material misstatements.

Question 31
Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts
This question has been regraded.

True or False:

I - The auditor should document the identified and assessed fraud risk
factors as well as his or her risk responses.

II - The auditor is required by PSA 240 to include forensic investigators

in the audit team when there is a suspicion of fraud on the financial
statements.

Yes, Yes
Yes, No

No, Yes

No, No

Question 32
Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts
This question has been regraded.

The distinguishing factor between fraud and error is whether the

underlying sction that results in the misstatement in the financial
statements is

Simple or complex

Intentional or unintentional

Voluntary or involuntary

Planned or unplanned
Question 33
Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts
This question has been regraded.

Which statement best describe the external auditor’sresponsibility

relating to fraud?

The auditor is responsible to prevent fraud and irregularities relating to the

financial statements of the client.

The auditor is responsible for identifying and assessing fraud risks for the
purpose of the conduct of a forensic investigation.

An auditor conducting an audit of the financial statements is responsible for

obtaining reasonable assurance that the financial statements taken as a
whole are free from material misstatement, whether caused by fraud or error.

An auditor conducting an audit of the financial statements is responsible for

obtaining reasonable assurance that the financial statements are free from
both material and immaterial fraud.

Question 34
Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts
This question has been regraded.

Which of the following factors most likely would heighten an auditor's

concern about the risk of fraudulent financial reporting?

Large amounts of near-cash items that are easily convertible to cash.

Low growth and profitability as compared to other entity's in the same
industry.

Financial management's participation in the initial selection of accounting

principles.

An overly complex organizational structure involving unusual lines of

authority.

Question 35
Original Score: 0 / 1 pts Regraded Score: 1 / 1 pts
This question has been regraded.

Error includes

Engaging in complex transactions that are structured to misrepresent the

financial position or financial performance of the entity.

Concealing or not disclosing facts that could affect the amounts recorded in
the financial statements.

An incorrect accounting estimate arising from oversight or misinterpretation

of facts.

Intentional misapplication of accounting policies relating to amounts in the

financial statements.

Quiz Score: 31 out of 35