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Auditing

In: Business and Management

Submitted By bill02
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Chapter 2: The Risk of Fraud and Mechanisms to Address Fraud: Regulation, Corporate Governance, and Audit Quality

1. The auditor is not responsible for the presentation of financial statements; therefore, the auditor has no responsibility for fraud in the financial statements.

FALSE 2. An example of fraudulent financial reporting is the CFO intentionally overstating sales to boost profits.

TRUE 3. The auditor is responsible for actively considering fraud risks in order to obtain reasonable assurance that the financial statements are free of material fraud.

TRUE 4. Auditors need to consider fraud arising from misappropriation of assets and fraudulent financial reporting.

TRUE 5. Fraud is an intentional act involving the use of deception that results in a material misstatement of the financial statements.

TRUE 6. An example of fraudulent financial reporting is the treasurer's diversion of hundreds of thousands of dollars into a personal money market account.

FALSE 7. BruceCo. has accounted for the revenue of Jiffy Mac, Inc., one of its suppliers as though it were its subsidiary. BruceCo. has probably committed fraud because of its misapplication of consolidation principles.

TRUE 8. Consideration of fraud in financial statement audits is a relatively new concept derived originally from the Sarbanes-Oxley Act.

FALSE

9. The most important lesson to be learned from The Great Salad Oil Swindle is that auditors can commit fraud by falsely including inventory that does not exist.

FALSE 10. The onslaught of fraud in financial statements over the recent decade has been the first of its kind in history.

FALSE 11. The fraud triangle requires the auditor to actively consider and assess the risk of fraud for clients and their financial statements.

FALSE 12. Fraud detection procedures...

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