Loose-leaf For Auditing & Assurance Services: A Systematic Approach
11th Edition
ISBN: 9781260687637
Author: William F Messier Jr, Steven M Glover Associate Professor, Douglas F Prawitt Associate Professor
Publisher: McGraw-Hill Education
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Question
Chapter 1, Problem 1.14MCQ
To determine
Concept Introduction:Auditing is an independent examination of financial statements. The set of financial statements includes
To choose:The reason due to which an independent auditor is often retained to report on financial statements.
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Which of the following best describes the reason why an independent auditorreports on financial statements?(1) A misappropriation of assets may exist, and it is more likely to be detected byindependent auditors.(2) Different interests may exist between the company preparing the statementsand the persons using the statements.(3) A misstatement of account balances may exist and is generally corrected as theresult of the independent auditor’s work.(4) Poorly designed internal controls may be in existence
With respect to fraudulent financial reporting, which one of the following statements is not correct?
a.The risk that the auditor will not detect misstatement due to management fraud is greater than those due to employee fraud.
b.It is difficult for the auditor to determine if misstatements in accounting estimates are caused by fraud or error.
c.When the audit is properly planned and performed in accordance with ISAs, material misstatements are guaranteed to be detected by the auditor.
d.Excessive pressure on management to meet expectations of third parties creates incentives for
The following are examples of circumstances that may indicate the possibility that the financial statements may contain a material misstatement resulting from fraud, except
Group of answer choices
Last-minute adjustments that significantly affect financial results or unusual journal entries.
Transactions that are recorded in a complete or timely manner or are properly recorded as to amount, accounting period, classification, or entity policy.
Unsupported or unauthorized balances or transactions.
Tips or complaints to the auditor about alleged fraud.
Chapter 1 Solutions
Loose-leaf For Auditing & Assurance Services: A Systematic Approach
Ch. 1 - Prob. 1.1RQCh. 1 - Prob. 1.2RQCh. 1 - Prob. 1.3RQCh. 1 - Prob. 1.4RQCh. 1 - Prob. 1.5RQCh. 1 - Prob. 1.6RQCh. 1 - Prob. 1.7RQCh. 1 - Prob. 1.8RQCh. 1 - Prob. 1.9RQCh. 1 - Prob. 1.10RQ
Ch. 1 - Prob. 1.11RQCh. 1 - Prob. 1.12RQCh. 1 - Prob. 1.13MCQCh. 1 - Prob. 1.14MCQCh. 1 - Prob. 1.15MCQCh. 1 - Prob. 1.16MCQCh. 1 - Prob. 1.17MCQCh. 1 - Prob. 1.18MCQCh. 1 - Prob. 1.19MCQCh. 1 - Prob. 1.20MCQCh. 1 - Prob. 1.21MCQCh. 1 - Prob. 1.22MCQCh. 1 - Prob. 1.23MCQCh. 1 - Prob. 1.24PCh. 1 - Prob. 1.25PCh. 1 - Prob. 1.26PCh. 1 - Prob. 1.28P
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Similar questions
- Which of the following statements describes why a properly designed and executedaudit may not detect a material misstatement in the financial statements resultingfrom fraud?(1) Audit procedures that are effective for detecting unintentional misstatements maybe ineffective for an intentional misstatement that is concealed through collusion.(2) An audit is designed to provide reasonable assurance of detecting materialerrors, but there is no similar responsibility concerning fraud.(3) The factors considered in assessing control risk indicated an increased risk ofintentional misstatements, but only a low risk of unintentional misstatements.(4) The auditor did not consider factors influencing audit risk for account balancesthat have effects pervasive to the financial statements taken as a wholearrow_forwardwould you say that material mistakes found in a financial statement could lead to the auditors being held liable?arrow_forwardWhy do fraud examiners handle information in a different manner than auditors? Why is thisimportant?arrow_forward
- Determine if false financial reporting or misuse of assets has occurred. Compare and contrast the potential differences between these two forms of fraud as they relate to the fair presentation of financial information.arrow_forwardWhich of the following statements is correct with regards to the auditor's responsibility concerning fraud? a.Fraud detection is the objective of an audit. b.It is the auditor's responsibility to prevent fraud. c.The auditor is responsible for obtaining reasonable assurance that the financial statements are free from material statement, whether caused by fraud or error. d.When fraud is discovered by the auditor they must withdraw from the engagement.arrow_forward“The deliberate fraud committed by management that injures investors and creditors through materially misleading financial statements. The use of incentive systems and opportunities for fraudulent behavior are associated with higher fraud risk assessments by audit partners; however, the most important factors are senior management ethical attitudes and dishonest communication from management with the external auditor.” Required: Compare and contrast financial statement fraud with asset misappropriation. Why is it important to analyze the relationship between a company and its auditors?arrow_forward
- Which of the following statements is not true with respect to written representations?a. The failure of management to furnish them is a significant scope limitation, resulting in either an adverse opinion or a disclaimer of opinion.b. They should address management’s responsibility for designing internal control to prevent and detect fraud.c. Auditors use them to corroborate information received during the audit from the client and its employees.d. They are dated the same date as the auditor’s reports.arrow_forwardWhen evaluating an internal control deficiency as part of a financial statement audit, the primary difference between a significant deficiency and a material weakness depends on: Multiple Choice whether there is a reasonable possibility that the company's internal control system will fail to prevent or detect and correct a misstatement of an account balance or disclosure. whether a misstatement has actually occurred as a result of the deficiency or the deficiencies. the magnitude of the potential misstatement resulting from the deficiency or the deficiencies. All of the choices are correct.arrow_forwardWhat role does the rationalization phase play in the process of financial statement fraud? A) Concealing fraudulent activities B) Initiating the fraudulent process C) Justifying unethical actions D) Exploiting weaknesses in controlsarrow_forward
- Distinguish between the terms errors and fraud. Distinguish between fraudulent financial reporting and misappropriation of assets. Discuss the likely difference between these two types of fraud on the fair presentation of financial statements. Define fraud, and explain the two types of misstatements that are relevant to auditor’s consideration of fraud.arrow_forwarda) Explain why auditors’ reports are important to users of financial statements and why it is desirable to have standard wording. b) b) Define the meaning of the term materiality as it is used in accounting and auditing. What is the relationship between materiality and the phrase obtain reasonable assurance used in the auditor’s report? c) c) Distinguish between fraudulent financial reporting and misappropriation of assets. Discuss the likely difference between those two types of fraud on the fair presentation of financial statements. NB: Please provide answers to question A, B and Carrow_forward1. What are the key differences between a conventional audit and a fraud examination? 2. To what extent does an auditor of financial statements have a responsibility to detect fraud?arrow_forward
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