1. Question : (TCO 4) In connection with the audit of financial statements, an independent auditor could be responsible for failure to detect a material fraud if Student Answer: statistical sampling techniques were not used on the audit engagement. the auditor planned the audit in a negligent manner. accountants performing important parts of the work failed to discover a close relationship between the treasurer and the cashier. the fraud was perpetrated by one employee who circumvented the existing internal controls. Question 2. Question : (TCO 4) “Absence of reasonable care that can be expected of a person is a set of circumstances” defines Student Answer: pecuniary negligence. gross negligence. extreme negligence. ordinary negligence. Question 3. Question : (TCO 4) While performing services for their clients, professionals have a duty to provide a level of care that is Student Answer: free from judgment errors. superior. greater than average. reasonable. Question 4. Question : (TCO 4) The objective of the ordinary audit of financial statements is the expression of an opinion on Student Answer: the fairness of the financial statements. the accuracy of the financial statements. the accuracy of the annual report. the accuracy of the annual report. Question 5. Question : (TCO 4) The auditor’s best defense when material misstatements are not uncovered is to have conducted the audit Student Answer: in accordance with auditing standards. as effectively as reasonably possible. in a timely manner. only after an adequate investigation of the management team. Question 6. Question : (TCO 3) Which of the following is not one of the reasons that auditors provide only reasonable assurance on the financial statements? Student Answer: The auditor commonly examines a sample, rather than the entire population of transactions. Accounting presentations contain complex estimates, which involve uncertainty. Fraudulently prepared financial statements are often difficult to detect. Auditors believe that reasonable assurance is sufficient in the vast majority of cases. Question 7. Question : (TCO 3) In the fraud triangle, fraudulent financial reporting and misappropriation of assets Student Answer: share little in common. share most of the same risk factors. share the same three conditions. share most of the same conditions. Question 8. Question : (TCO 3) After fraud risks are identified and documented, the auditor should evaluate factors that _____ fraud risk, before developing an appropriate response to the risk of fraud. Student Answer: enhance reduce increase increase or decreaseQuestion 9. Question : (TCO 3) Which of the following statements describes circumstances that underlie employee incentives to misappropriate assets? Student Answer: Dissatisfied employees may steal from a sense of entitlement. Weak internal controls encourage employees to take chances. If management cheats customers and gets away with it, then employees believe they can do the same to the company. Each of the above describes circumstances underlying employee incentives to misappropriate assets.
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