Auditing: A Risk Based-Approach to Conducting a Quality Audit
10th Edition
ISBN: 9781305080577
Author: Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher: South-Western College Pub
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Chapter 2, Problem 15MCQ
To determine
Introduction:Opportunity is referred as situations that increases the opportunity for a perpetrator to commit fraud and reduces the risk of getting caught. Weakness in internal controls and complex transactions are the basic factors which increases the opportunity to commit fraud.
To identify:The option that represent an opportunity to commit fraud.
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Which of the following is not a purpose of internal controls?
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Accurate accounting records
Explain the three special characteristics of management fraud:
a. The fraud is perpetrated at levels of management above the one to which internal control structures generally relate.
b. The fraud frequently involves using the financial statements to create an illusion that an entity is healthier and more prosperous than, in fact, it is.
c. If the fraud involves misappropriation of assets, it frequently is shrouded in a maze of complex business transactions, often involving related third parties.
Please provide me a correct and clear explanations. Thank you!
Which of the following would assist an entity in cat and prevent fraud? a. Accounting reconciliations b. Segregation of duties c. All the options d. Performance reviews
Chapter 2 Solutions
Auditing: A Risk Based-Approach to Conducting a Quality Audit
Ch. 2 - The Great Salad Oil Swindle of 1963 is an asset...Ch. 2 - Prob. 2TFQCh. 2 - The three elements of the fraud triangle include...Ch. 2 - Prob. 4TFQCh. 2 - Prob. 5TFQCh. 2 - Prob. 6TFQCh. 2 - Prob. 7TFQCh. 2 - Prob. 8TFQCh. 2 - Prob. 9TFQCh. 2 - Prob. 10TFQ
Ch. 2 - Prob. 11TFQCh. 2 - Prob. 12TFQCh. 2 - Prob. 13MCQCh. 2 - Prob. 14MCQCh. 2 - Prob. 15MCQCh. 2 - Prob. 16MCQCh. 2 - Prob. 17MCQCh. 2 - Prob. 18MCQCh. 2 - Prob. 19MCQCh. 2 - Prob. 20MCQCh. 2 - Prob. 21MCQCh. 2 - Prob. 22MCQCh. 2 - Prob. 23MCQCh. 2 - Prob. 24MCQCh. 2 - Prob. 25RSCQCh. 2 - Prob. 26RSCQCh. 2 - Prob. 27RSCQCh. 2 - Refer to Exhibit 2.1 a. What is a Ponzi scheme? b....Ch. 2 - Prob. 29RSCQCh. 2 - Prob. 30RSCQCh. 2 - Prob. 31RSCQCh. 2 - Prob. 32RSCQCh. 2 - Prob. 33RSCQCh. 2 - Prob. 34RSCQCh. 2 - Prob. 35RSCQCh. 2 - Prob. 36RSCQCh. 2 - Prob. 37RSCQCh. 2 - Prob. 38RSCQCh. 2 - Many consider the Enron fraud to be one of the...Ch. 2 - Prob. 40RSCQCh. 2 - Prob. 41RSCQCh. 2 - Refer to Exhibit 2.5 and answer the following...Ch. 2 - Prob. 43RSCQCh. 2 - Prob. 44RSCQCh. 2 - Prob. 45RSCQCh. 2 - Prob. 46RSCQCh. 2 - Prob. 47RSCQCh. 2 - Prob. 48RSCQCh. 2 - Prob. 49RSCQCh. 2 - Prob. 50FFCh. 2 - Prob. 51FFCh. 2 - Prob. 52FF
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- Which of the following would a fraudster perceive as a pressure? A. lack of management oversight B. everyone does it C. living beyond ones means D. lack of an internal audit functionarrow_forwardJj.arrow_forwardWhich is NOT a source of fraud risk (from the Fraud Triangle)? a) Fraud Tip Hotline b) Perceived Opportunity c) Rationalization d) Financial Pressurearrow_forward
- Which one of the following is not an objective of a system of internal controls? Select one: 1. Overstate liabilities in order to be conservative 2. Enhance the accuracy and reliability of accounting records 3. Safeguard company assets 4. Reduce the risks of errorsarrow_forwardQuestion 1 (i) Which of the following will NOT be a likely ground to blow the whistle?A. When there are serious breaches of company rules and regulationsB. When somebody feels personally aggrievedC. When there are threats to human safetyD. When there are serious concerns about a possible fraud (ii) Which of the following is not an example of internal control risk?A. Risks of errors or fraud in accounting systems and accounting and finance activities.B. Risks that important laws and regulations will not be complied with properly.C. Risks that arise in the business environment and markets in which the company operatesD. The risk of losses resulting from inadequate or failed internal processes, people and systems or external events. (iii) Which of the following is NOT a statutory duty of a director?A. Duty to disclose any money received in connection of a transfer of company property.B. Duty to exercise due diligence in their work C. Duty to contribute an appropriate sum of money to the…arrow_forwardWhich of the following combinations is a good way to conceal employee fraud but an ineffective means of perpetrating management (financial reporting) fraud?a. Overstating sales revenue and overstating customer accounts receivable balances.b. Overstating sales revenue and overstating bad debt expense. c. Understating interest expense and understating accrued interest payable.d. Omitting the disclosure information about related-party sales to the president’s relatives at below-market prices.arrow_forward
- Why is it important for companies to analyze revenue and accounts receivable? How can these areas lend themselves to fraud when left with lack of segregation of duties, weak controls and recordkeeping delays?arrow_forwardIn accounting, which term describes deficiencies or flaws in the design or operation of internal controls that could increase the risk of errors, fraud, or misstatements in financial reporting? a) External audit b) Compliance review c) Internal control weaknesses d) Financial statement analysisarrow_forwardResearch a company that had a fraud event happen due to inadequate accounting procedures. Review the fraud event that happened in the company in detail and identify at least two accounting control procedures that were deficient in this event. Propose an internal control system that would have eliminated the fraud, using the ERP system.arrow_forward
- Management fraud (fraudulent financial reporting) is not the expected norm, but it happens from time to time. In the United States, several cases have been widely publicized. They happen when motives and opportunities overwhelm managerial integrity.a. What distinguishes management fraud from a defalcation?b. What are an auditor’s responsibilities under auditing standards to detect management fraud?c. What are some characteristics of management fraud that an audit team should consider to fulfill the responsibilities under auditing standards?d. What factors might an audit team notice that should heighten the concern about the existence of management fraud?e. Under what circumstances might an audit team have a duty to disclose management’s frauds to parties other than the company’s management and its board of directors?arrow_forwardWhat is the concept behind separation of duties in establishing internal control? a. Employee fraud is less likely to occur when access to assets and access to accounting records are separated. b. The company’s financial accountant should not share information with the company’s tax accountant. c. Duties of middle-level managers of the company should be clearly separated from those of top executives. d. The external auditors of the company should have no contact with managers while the audit is taking place.arrow_forwardInternal control can only provide reasonable, not absolute, assurance of achieving entity control objectives. One of the factors limiting the likelihood of achieving those objectives is that A. The auditor's primary responsibility is the detection of fraud B. Management monitors internal control C. The cost of internal control should not exceed its benefits D.The board of directors is active and independentarrow_forward
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