Forensic Accounting Midterm Exam
Questions and Accurate Answers
Sarbanes-Oxley sets out 10 non-audit services that registered public accounting firms are
prohibited from providing to issuers for whom they perform financial statement audits: -
✔✔Bookkeeping
Financial information system design and implementation
Appraisal or valuation services, fairness opinions, or contribution-in-kind reports
Actuarial services
Internal auditing outsourcing services
Management functions
Human resource services
Broker or dealer, investment advisor, or investment banking services
Legal services and expert services unrelated to the audit
Any other service the PCAOB determines, by regulation, is impermissible
Professional scepticism - ✔✔Professional scepticism is an attitude that includes a questioning
mind and a critical assessment of audit evidence
Process of verification - ✔✔Completeness, Accuracy, Validity
Loose thread theory of auditing - ✔✔Suggests that in most frauds there are indications of the
defalcation that could reveal the nature of the offense, although not its total impact.
Fraudulent misstatements include such acts as: - ✔✔- Manipulation or falsification of financial
or accounting records.
- Financial statement misrepresentation of events or transactions.
- Intentional misapplication of accounting principles.
Questions and Accurate Answers
Sarbanes-Oxley sets out 10 non-audit services that registered public accounting firms are
prohibited from providing to issuers for whom they perform financial statement audits: -
✔✔Bookkeeping
Financial information system design and implementation
Appraisal or valuation services, fairness opinions, or contribution-in-kind reports
Actuarial services
Internal auditing outsourcing services
Management functions
Human resource services
Broker or dealer, investment advisor, or investment banking services
Legal services and expert services unrelated to the audit
Any other service the PCAOB determines, by regulation, is impermissible
Professional scepticism - ✔✔Professional scepticism is an attitude that includes a questioning
mind and a critical assessment of audit evidence
Process of verification - ✔✔Completeness, Accuracy, Validity
Loose thread theory of auditing - ✔✔Suggests that in most frauds there are indications of the
defalcation that could reveal the nature of the offense, although not its total impact.
Fraudulent misstatements include such acts as: - ✔✔- Manipulation or falsification of financial
or accounting records.
- Financial statement misrepresentation of events or transactions.
- Intentional misapplication of accounting principles.
