Chapter 11 Fraud Auditing

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Auditing and Assurance Services, 14e (Arens)
Chapter 11 Fraud Auditing

Learning Objective 11-1

1)Which of the following best defines fraud in a financial statement
auditing context? A) Fraud is an unintentional misstatement of the
financial statements.
B) Fraud is an intentional misstatement of the financial statements.
C) Fraud is either an intentional or unintentional misstatement of the financial
statements, depending on materiality.
D) Fraud is either an intentional or unintentional misstatement of the financial statements,
depending on consistency.
Answer: B
Terms: Definition of fraud in financial statement auditing
Diff: Easy
Objective: LO 11-1
AACSB: Reflective thinking skills

2) Companies may intentionally understate earnings when income is high to create a reserve of
"earnings"
that may be used in future years to increase earnings. This practice
is known as: A) performance-based management.
B) earnings
management. C)
asset management.
D) expense
management.
Answer: B
Terms: Intentionally understate earnings; Reserve earnings
Diff: Easy
Objective: LO 11-1
AACSB: Reflective thinking skills




1
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3)Which of the following is a category of
fraud? A)
Fraudulent financial reporting Misappropriation of assets
Yes Yes

B)
Fraudulent financial reporting Misappropriation of assets
No No

C)
Fraudulent financial reporting Misappropriation of assets
Yes No

D)
Fraudulent financial reporting Misappropriation of assets
No Yes

Answer: A
Terms: Category of fraud
Diff: Easy
Objective: LO 11-1
AACSB: Reflective thinking skills

4)With respect to misappropriation of assets, most
frauds involve: A)
Intentional misstatements of
Inventory or liquid asset theft amounts
Yes Yes

B)
Intentional misstatements of
Inventory or liquid asset theft amounts
No No

C)
Intentional misstatements of
Inventory or liquid asset theft amounts
Yes No
Yes No
D)
Intentional misstatements of
Inventory or liquid asset theft amounts
No Yes

Answer: C
Terms: Misappropriation of assets
fraud
Diff: Easy
Objective: LO 11-1
AACSB: Reflective thinking skills

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