ch. 6- audit

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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?

An unreliable accounting system.


The audit committee of a company must be made up of:

Members of the board of directors who are not officers or employees.


Which of the following should not normally be included in the engagement letter for an audit?

A listing of the clients branch officers selected for testing.


Which portion of an audit is LEAST likely to be completed before the balance sheet date?

Substantive procedures.


Which of the following should the auditors obtain from the predecessor auditors before accepting an audit engagement?

Facts that might bear on the integrity of management.


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:

Recorded sales have been properly posted to customer accounts.


The primary objective of tests of details of transactions performed as substantive procedures is to:

Detect material misstatements in the financial statements.


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:

Detection risk.


Which of the following elements underlies the application of generally accepted auditing standards, particularly the standards of fieldwork and reporting?

Materiality and audit risk.


Which of the following best describes what is meant by the term "fraud risk factor"?

Factors often observed in circumstances where frauds have occurred.


Three conditions generally are present when fraud occurs. Select the one below that is NOT one those conditions.

Supervisory position


Which of the following is most likely to be an overall response to fraud risks identified in an audit?

Use less predictable audit procedures.