1
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C254 WGU Practice Review Questions
and Answers (100% Correct Answers)
Already Graded A+
Q: In the past (early 20th century time-frame), what was the
general consensus of the principal purpose of audits (including
among auditors)?
© 2025 Assignment Expert
To detect fraud
To certify for the public that management is qualified to run the
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entity
To evaluate that companies follow GAAP
Investigative and analytical purposes
Ans: To detect fraud
Q: Why has there been so much frustration between the general
public and auditors regarding fraud detection?
The auditors were not sufficiently trained in GAAP rules and
regulations to identify fraud risks properly.
The public felt searching for fraud was pointless and was costing
their investments too much money; if fraudsters want to hide
things, they will succeed.
, 2
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The auditors were taking short cuts and trying to make as large a
profit as possible and therefore weren't performing as they should
have.
The public wants all cases of fraud detected, while auditors felt
they only needed to be "reasonably certain" of its absence.
Ans: The public wants all cases of fraud detected, while auditors felt
they only needed to be "reasonably certain" of its absence.
Q: True or False
© 2025 Assignment Expert
Auditors can only say, with 100% certainty, that there is no fraud if
they examine every transaction. Otherwise, there will always be
some measure of doubt.
Guru01 - Stuvia
Ans: True
Q: AICPA and the Cohen Commission (the commission on
auditor's responsibility) fought over something specific concerning
the fall of Equity Funding in the 1970's. This conflict highlighted a
major communication issue between auditors and financial
statement users during much of the 20th century. What was this
conflict about?
How much responsibility should the auditor take when
endeavoring to detect (or fails to detect) fraud
The severity of punishment top management of the company with
fraud should be subjected to when they perpetrate fraud
The auditors consistently weren't detecting fraud due to improper
training
, 3
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The public felt that auditors needed to be more of a consultant
than anything else, but the AICPA disagreed with this
Ans: How much responsibility should the auditor take when
endeavoring to detect (or fails to detect) fraud
Q: True or False
In the beginning of the 20th century, everyone believed that the
main purpose of audits was to detect fraud. However, at this time,
Standards on Audit Procedures (SAP's) began to come forth,
making it official that auditors really were responsible for fraud,
© 2025 Assignment Expert
and that fraud detection was a priority second to none.
Ans: False
SAP No. 1 actually began to define audits as more than just fraud
detection. Since then, audits never had has their principal purpose
fraud detectio
Guru01 - Stuvia
Q: What did Audit Standard No. 99 do that previous standards
didn't?
Created a special SEC task force to aggressively
attach/investigate all "high risk" public companies
It establishes black and white standards to evaluate whether the
auditor did their job correctly, especially in their search for fraud.
Requires all auditors to publish their work papers so financial
statement users can evaluate for themselves if the auditors were
thorough enough or not.
Established the purpose of audits to be a more consultatory in
nature than verifying GAAP rules and fraud detection
, 4
For Expert help and assignment solutions, +254707240657
Ans: It establishes black and white standards to evaluate whether the
auditor did their job correctly, especially in their search for fraud.
Q: True or False
Despite many attempts to close the "expectation gap" between
auditors and the public, the AICPA wasn't successful until SAS No.
99.
Ans: True
Q: True or False
The idea "fraud" was not explicitly addressed until the 1990's. Fraud
© 2025 Assignment Expert
was addressed as "errors and irregularities."
Ans: False
Q: True or False
Guru01 - Stuvia
Audit standards involving auditors' responsibility in fraud detection
has been to "reasonably assure" the lack of fraud in financial
statements, but didn't clearly articulate the breadth and scope of
their responsibility until SAS No. 99, thus causing the "expectation
gap" between the public and CPA auditors.
Ans: True
Q: The AICPA has had one major goal in issuing auditing
standards about fraud, but never really met its goal until SAS No.
99. What was that goal?
Eliminate the gap between financial statement users'
expectations and auditors' assurances.
Eliminate the need for auditors to detect fraud and focus on
evaluating internal controls and verify that all GAAP rules and
regulations have been followed.
For Expert help and assignment solutions, +254707240657
C254 WGU Practice Review Questions
and Answers (100% Correct Answers)
Already Graded A+
Q: In the past (early 20th century time-frame), what was the
general consensus of the principal purpose of audits (including
among auditors)?
© 2025 Assignment Expert
To detect fraud
To certify for the public that management is qualified to run the
Guru01 - Stuvia
entity
To evaluate that companies follow GAAP
Investigative and analytical purposes
Ans: To detect fraud
Q: Why has there been so much frustration between the general
public and auditors regarding fraud detection?
The auditors were not sufficiently trained in GAAP rules and
regulations to identify fraud risks properly.
The public felt searching for fraud was pointless and was costing
their investments too much money; if fraudsters want to hide
things, they will succeed.
, 2
For Expert help and assignment solutions, +254707240657
The auditors were taking short cuts and trying to make as large a
profit as possible and therefore weren't performing as they should
have.
The public wants all cases of fraud detected, while auditors felt
they only needed to be "reasonably certain" of its absence.
Ans: The public wants all cases of fraud detected, while auditors felt
they only needed to be "reasonably certain" of its absence.
Q: True or False
© 2025 Assignment Expert
Auditors can only say, with 100% certainty, that there is no fraud if
they examine every transaction. Otherwise, there will always be
some measure of doubt.
Guru01 - Stuvia
Ans: True
Q: AICPA and the Cohen Commission (the commission on
auditor's responsibility) fought over something specific concerning
the fall of Equity Funding in the 1970's. This conflict highlighted a
major communication issue between auditors and financial
statement users during much of the 20th century. What was this
conflict about?
How much responsibility should the auditor take when
endeavoring to detect (or fails to detect) fraud
The severity of punishment top management of the company with
fraud should be subjected to when they perpetrate fraud
The auditors consistently weren't detecting fraud due to improper
training
, 3
For Expert help and assignment solutions, +254707240657
The public felt that auditors needed to be more of a consultant
than anything else, but the AICPA disagreed with this
Ans: How much responsibility should the auditor take when
endeavoring to detect (or fails to detect) fraud
Q: True or False
In the beginning of the 20th century, everyone believed that the
main purpose of audits was to detect fraud. However, at this time,
Standards on Audit Procedures (SAP's) began to come forth,
making it official that auditors really were responsible for fraud,
© 2025 Assignment Expert
and that fraud detection was a priority second to none.
Ans: False
SAP No. 1 actually began to define audits as more than just fraud
detection. Since then, audits never had has their principal purpose
fraud detectio
Guru01 - Stuvia
Q: What did Audit Standard No. 99 do that previous standards
didn't?
Created a special SEC task force to aggressively
attach/investigate all "high risk" public companies
It establishes black and white standards to evaluate whether the
auditor did their job correctly, especially in their search for fraud.
Requires all auditors to publish their work papers so financial
statement users can evaluate for themselves if the auditors were
thorough enough or not.
Established the purpose of audits to be a more consultatory in
nature than verifying GAAP rules and fraud detection
, 4
For Expert help and assignment solutions, +254707240657
Ans: It establishes black and white standards to evaluate whether the
auditor did their job correctly, especially in their search for fraud.
Q: True or False
Despite many attempts to close the "expectation gap" between
auditors and the public, the AICPA wasn't successful until SAS No.
99.
Ans: True
Q: True or False
The idea "fraud" was not explicitly addressed until the 1990's. Fraud
© 2025 Assignment Expert
was addressed as "errors and irregularities."
Ans: False
Q: True or False
Guru01 - Stuvia
Audit standards involving auditors' responsibility in fraud detection
has been to "reasonably assure" the lack of fraud in financial
statements, but didn't clearly articulate the breadth and scope of
their responsibility until SAS No. 99, thus causing the "expectation
gap" between the public and CPA auditors.
Ans: True
Q: The AICPA has had one major goal in issuing auditing
standards about fraud, but never really met its goal until SAS No.
99. What was that goal?
Eliminate the gap between financial statement users'
expectations and auditors' assurances.
Eliminate the need for auditors to detect fraud and focus on
evaluating internal controls and verify that all GAAP rules and
regulations have been followed.
