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Unformatted text preview: ch6 Student: ___________________________________________________________________________ 1. When auditing financial statements and finding indications of a possible misappropriation of assets, independent auditors should A. Investigate fully to determine the total amount of the misappropriation. B. Determine which accounts are affected and the amount by which they are overstated or understated. C. Determine the methods by which the misappropriation was carried out. D . Identify a person(s) who are likely responsible for the misappropriation and obtain evidence about some other fraud indications in their work. E. All of the above. 2. When an employee embezzles company funds from an electric utility company for the purpose of paying expenses of an anti-nuclear protest organization, the fraudster's motive is said to be A. Psychotic B. Egocentric C. Ideological D. Economic 3. Which of the following management policies would increase the probability of fraud in a company? A. Diversifying authority throughout divisions and subsidiaries in the organization. B. Measuring performance and awarding bonuses based on short-term operating results. C . Giving employees performance feedback that considers positive and constructive praise along with critical and negative observations on their work. D. Establishing work teams that share responsibilities, performance, and bonuses based on collective efforts. 4. Which of the following is not considered one of the three factors increasing the probability of fraud? A. Motive. B. Lack of training. C. Opportunity. D. Rationalization. 5. Which of the following is ordinarily considered an "extended procedure" during the independent audit of financial statements? A. Send positive confirmations on recorded customer accounts receivable balances. B. Perform physical observation and test count during the client's inventory taking. C. Measure the time lag between the date of recording cash receipts in the books to the date of deposit credit in the bank. D. Conduct interviews with the client's sales billing personnel to learn about sales recording control activities. 6. If the amount of a check is altered by an employee after it has cleared the bank, the change can be detected by A. Comparing the amount written on the check face to the amount written in the cash disbursements journal. B. Comparing the magnetic imprint of the amount paid to the amount written on the check face. C. Examining the endorsement on the back of the check. D. Comparing the check number on the face of the check to the check number in the cash disbursements journal. 7. Which of the following would be consistent with an employee taking cash receipts from customers on account?...
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This note was uploaded on 10/04/2011 for the course SOM 6401 taught by Professor Chrits during the Spring '11 term at University of Texas.
- Spring '11