California State University, Stanislaus

ACCOUNTING 4110

Chapter 6:

1)In planning and performing an audit, auditors are concerned about risk factors for two distinct types of fraud: fraudulent financial reporting and misappropriation of assets. Which of the following is a risk factor for misappropriation of assets?

2. The audit committee of a company must be made up of:
3. Which of the following should not normally be included in the engagement letter for an audit?
4. Which portion of an audit is least likely to be completed before the balance sheet date?
5. Which of the following should the auditors obtain from the predecessor auditors before accepting an audit engagement?

6. As one step in testing sales transactions, a CPA traces a random sample of sales journal entries to debits in the accounts receivable subsidiary ledger. This test provides evidence as to whether:
7. The primary objective of tests of details of transactions performed as substantive procedures is to:
8. The risk that the auditors will conclude, based on substantive procedures, that a material misstatement does not exist in an account balance when, in fact, such misstatement does exist is referred to as
9. Which of the following elements underlies the application of generally accepted auditing standards, particularly the standards of fieldwork and reporting?
10. Which of the following best describes what is meant by the term “fraud risk factor”?
11. Three conditions generally are present when fraud occurs. Select the one below that is not one of those conditions.
12. Which of the following is most likely to be an overall response to fraud risks identified in an audit?
13. Assume the following general flow of documents in an accounting system. Reply to the following question:

The auditors are concerned about source documents that reflect valid transactions that have not been recorded in the journals. Which procedure would be most effective?

14. Assume the following general flow of documents in an accounting system. Reply to the following question:

The auditors are concerned about transactions that have been recorded in the journals (and subsequently in the ledgers) that are not valid—that is, a transaction is recorded, but it did not actually occur (e.g., a fraudulent overstatement of sales). Which procedure would be most effective?

15. Assume the following general flow of documents in an accounting system. Reply to the following question:

The auditors are concerned about transactions that have been recorded for improper amounts. Which procedure would be most effective?

16. Assume the following general flow of documents in an accounting system. Reply to the following question:

Tracing from source documents to journals most directly tests:

17. Assume the following general flow of documents in an accounting system. Reply to the following question:

Vouching from journals (or ledgers) to source documents most directly tests: