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Chapter 9: Auditing for Fraud Chapter 9: Auditing for Fraud Student: ___________________________________________________________________________ 1. Since management can collude to perpetrate a fraud, the auditor has limited responsibility for detecting fraud in the financial statements. True False 2. An example of a defalcation is the CFO intentionally overstating the accounts receivable and sales to boost profits. True False 3. The auditor of financial statements has a responsibility to actively consider fraud in order to obtain reasonable assurance that financial statements are free of material fraud. True False 4. According to the Association of Certified Fraud Examiners, corruption includes the act of accepting undue payments from suppliers to accept products into the organization. True False 5. It is considered fraud for an employee of an organization to wrongly use influence to procure a personal benefit that is contrary to their duty to the organization. True False 6. An example of financial statement manipulation 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 only owns 2% of Jiffy and does not exercise any influence or control, nor is it considered a Variable Interest Entity. BruceCo. has probably committed fraud because of its blatant misapplication of consolidation principles. True False 8. Consideration of fraud in financial statement audits is a relatively new concept derived originally from SAS 99. True False 9. The most important lesson to be learned from the famous salad oil case is that a client can commit fraud by falsely moving inventory during a physical count to overstate the inventory balance. 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. SAS 99 requires the auditor to more actively consider and assess the risk of fraud for clients and their financial statements than had been required in the past. True False 12. SAS 99 procedures must only be performed for clients that have had fraud concerns in the past. True False 13. If an auditor discovers risk of fraud in the application of SAS 99 procedures, the audit procedures should be adjusted accordingly. True False 14. Professional skepticism is required on audit engagements that have a high risk of fraud but can be disregarded for audit engagements with low risk of fraud. True False 15. According to professional audit standards, the audit team should meet early in the planning stages of an audit to conduct a fraud "brainstorming" meeting in order to determine the types of fraud that may occur with the client. ... View Full Document

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