ACCT 561 Final Exam

ACCT 561 Final Exam Which of the following situations represents a risk factor that relates to misstatements arising from misappropriation of assets? Correct answer- b) lack of independent checks What outside parties must the auditor disclose the existence of fraud to? Correct answer- The SEC when client reports an auditor change, a successor auditor when they inquire, governmental agencies financially assisting client Which of the following procedures would least likely result in the discovery of possible illegal acts? Correct answer- d. Reviewing IC questionnaire What assurance does the auditor provide regarding direct and indirect effect illegal acts? Correct answer- Reasonable assurance of direct effect, no assurance for indirect If specific information that implies the existence of possible illegal acts that could have a material but indirect effect on the f/s comes to an auditor's attention, the auditor should next ...? Correct answer- Apply audit procedures specifically directed to ascertaining whether an illegal act has occurred During the audit of a new client, the auditor determined that mgmt has given illegal bribes to municipal officials during the year under audit and for several prior years. The auditor notified the client's BOD, but the BOD decided to take no action because the amount was immaterial. Under these circumstances, the auditor should ...? Correct answer- Consider withdrawing from the audit engagement and disassociating from future relationships with the client Which of the following is least likely to be required on an audit? Correct answer- b) make a legal determination of whether fraud has occurred Which of the following is most likely to be an overall response to fraud risks identified in an audit? Correct answer- Use less predictable audit procedures Which of the following is least likely to be included in an auditor's inquiry of management while obtaining information to identify the risks of material misstatement due to fraud? Correct answer- Are financial reporting operations controlled by and limited to one location? Individuals who commit fraud have what three things? (triangle) Correct answer- Incentive, opportunity, rationalization