Lack of independent audits
Which of the following is NOT one of the most common audit deficiencies identified in PCAOB inspections?
A fraudulent insurance restoration scam
In the ZZZZ best case, Barry Minkow was charged with:
The employee will be fired unless s/he goes along with the fraud
All of the following tend to be rationalizations for fraud except:
The procedures followed by the auditor in evaluating evidence
PCAOB Auditing Standard No.16 requires the auditor to communicate with the audit committee all but:
Chinese regulatory agencies can be uncooperative in providing access to PCAOB regarding their inspections of audit documents
The main reason the PCAOB has charged Chinese affiliates of U.S. audit firms with failing to provide sufficient documentary evidence of audits of Chinese companies listed on U.S. exchanges is:
Unmodified opinion
If the financial statements are not materially misstated, the auditor should give a(an):
Assess the impact of the illegal act on the financial statements
The first step for an auditor who concludes an illegal act exists is to:
A process, effected by an entity's board of directors, management, and other personnel designed to identify potential events that may affect the entity and to manage risk within its risk appetite
What is enterprise risk management (ERM)?
Failure to gather sufficient competent evidence
Which of the following audit deficiencies was identified most often in a study by the Center for Audit Quality of SEC imposed sanctions?
Assess how an audit has been conducted and the firm's own quality control procedures
PCAOB Standard 7 addresses engagement quality reviews and have as its objectives to:
When the auditor concludes that management cannot be trusted
When would it be appropriate for an auditor to withdraw from an engagement?
Failure of the corporate governance system
The best explanation why the fraud at Tyco was not discovered and acted on is:
Availability
In gathering audit evidence, the accessibility of information may be a factor thereby influencing which judgment trigger?
Report of the Independent Registered Audit Firm
The title of the PCAOB auditor's report is:
The statements are not in conformity with generally accepted accounting principles regarding stock options plans and but does not have pervasive effect on the financial statements
In which of the following circumstances would a qualified opinion be appropriate?
Fraud is always an intentional act designed to deceive another party
The difference between errors in the financial statements as compared to fraud is:
It demonstrates professional skepticism
Audit documentation is critical to evidence gathering because:
Management's certification of the financial statements
Section 302 of the Sarbanes-Oxley Act requires:
Whether to inform management or the regulatory authorities of illegal acts of an audit client
Bill Young's ethical dilemma was:
Importance of audit committee in the organization
Which of the following is not a consideration in determining a measure of materiality?
Cover up Ethan's fraud
In the Loyalty and Fraud Reporting case, Ethan Lester pressured his friend Vic Jensen to:
Omission of notes to the financial statements
Misstatements in the financial statements are most likely to occur when there are:
Audit procedures are specific acts performed by the auditor to gather evidence about whether specific assertions are being met
Audit procedures are different than audit evidence because:
The PCAOB report does not have section headings
One difference between the AICPA auditor's report and that of the PCAOB is:
Issue an unmodified opinion with an emphasis-of-matter paragraph
Typically, when a going concern issue exists the auditor should:
The auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion
Under which of the following set of circumstances might the auditors disclaim an opinion?
Setting up special-purpose-entities to keep debt off Tyco's books
Which of the following elements were NOT part of the fraud at Tyco?
Materiality should be predictable from audit to audit so that the readers of financial statements know what constitutes materiality
Which of the following is not correct about materiality?
The audit opinion is a guarantee that material misstatements have been identified
Which of the following is not true of "reasonable assurance"?
Related party transactions
The primary issue in the Rooster, Hen, Footer and Burger case is:
Whether the accounting principles used are appropriate in the circumstances
The auditors' determination of whether the financial statements "present fairly" is based on:
States the audit evaluates the overall financial statement presentation
Which of the following is NOT an element of the auditor's responsibility of the AICPA's auditor's report?
Professional skepticism
Because of the risk of material misstatement due to improper management representations, an audit of financial statements in accordance with GAAS should be performed with:
The illegal acts have a direct and material effect on financial statement amounts
The auditor's responsibility with regard to illegal acts is greatest when:
Misrepresentation of events, transactions, and other significant events in the financial statements
An example of fraudulent financial statements is:
Improving deployment of information technology
Which of the following is not an element of COSO
Top management was frequently involved in the fraud with the CEO and/or CFO being the most frequently involved
The Committee of Sponsoring Organizations of the Treadway Committee (COSO) analyzed the financial reporting of public companies during the 1998-2007 periods when business failures due to accounting fraud were high and found that:
Significant deficiencies in audit procedures
Which of the following is NOT one of the communications that should be made by external auditors to the audit committee?
Criteria for judging the quality of audit work
Which of the following summarizes the essence of field work standards of GAAS?
Qualitative factors may cause quantitatively small misstatements to become material
The SEC is concerned that auditors don't pay enough attention to qualitative factors affecting materiality because:
Identifies the entity, financial statements being audited and time period
Which of the following is an element of the introductory paragraph of an auditor's report under AICPA standards?
Communicate to the audit committee both material and immaterial amounts of fraud that are detected
The auditors' responsibility to communicate findings with respect to fraud can best be summarized as:
Gathering sufficient audit evidence to warrant an opinion
Which of the following is not one of the reporting standards of GAAS that guides auditors in formulating the audit opinion?
Improper recognition of gross revenue
The Groupon case deals with all but the following issues:
Evaluating management's commitment to serve the public interest
Which of the following is NOT something external auditors are expected to do in looking for fraud?
Auditor's determination of whether the auditor has obtained sufficient appropriate evidence
PCAOB Standard 14 addresses audit results and requires:
Ability to carry out the fraud
Which of the following is NOT a pressure that might lead to fraud?
Client refuses to take the remedial steps deemed necessary by the auditors
An auditor concludes that a client has committed an illegal act that has not been properly accounted for or disclosed.
Material
Auditors are responsible to detect and correct errors when they are:
Quality of professionals that perform an audit
Which of the following summarizes the essence of general standards of GAAS?
Whether the company has an anonymous hot line
Which of the following is not one of the evaluations of the control environment of an organization?
All of the above
Misstatements in the financial statements can result from:
Errors
Fraud
Illegal acts improperly recorded
All of the above
It protects the auditor's accounting for fraud and illegal acts
Confidential client information can be disclosed outside the entity without violating the AICPA Code of Professional Conduct in each of the following situations except when:
All of the above are additional requirements
The Private Securities Litigation Reform Act imposes additional requirements on public companies reporting to the SEC and their auditors when:
The illegal act has a material effect on the financial statements
Senior management and the board have not acted
The design and performance of audit procedures to respond to assessed risks
In an audit, the auditor has a requirement to address risk assessment with respect to:
Operating losses over an extended period of time
In the Imperial Valley Community Bank case, each of the following were reasons for the going concern issue except: