Chapter 2 Rba

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

Student: ___________________________________________________________________________

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

True False

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

True False

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 False

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

True False

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

True False

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

True 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 False

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

True 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.

True False

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

True False

11. The fraud triangle requires the auditor to actively...