ACC 550 Exam 2
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1. Which is most financial reporting fraud
costly type of
fraud?
2. Fraud can be It cant be eliminated
eliminated by....
3. What is the dis- Intent
tinguishing fac-
tor between
fraud and error?
4. Who has pri- Those charged with governance and management
mary responsibil-
ity for prevention
and detection of
fraud?
5. Are auditors re- is responsible for obtaining reasonable assurance that the financial statements
sponsible for taken as a whole are free from material misstatement, whether caused by fraud
the detection of or error.
fraud?
6. Obtaining infor- Inquiry of management and those charged with governance, analytical proce-
mation needed dures during risk assessment, and fraud risk factors
to identify risks
of material mis-
statement due to
fraud includes
7. Key guidance -Importance of professional skepticism
from AU-C 240: -Fraud brainstorming
How to incorpo- -Obtaining information needed to identify risks of material misstatement due to
, ACC 550 Exam 2
Study online at https://quizlet.com/_jeotpp
rate fraud con- fraud
siderations into -assign personnel and supervise, taking into account fraud assessment
the audit -evaluate selection and application of accounting principles
-incorporate element of unpredictability into selection of audit procedures
8. PCAOB observa- -checklist approach
tions about fraud -lack of documentation inhibits review
detection by au- -failed to expand audit procedures
ditors -brainstorming session held too late
-session not attended by key members
-Failed to evaluate risk of management override
-analytical procedures not well-suited to detect fraud
9. Responses to - review accounting estimates for biases
address risk - evaluate the business rationale for significant unusual transactions
of management - test the appropriateness of journal entries and other adjustments
override
10. Why does AU-C Even if specific risks of material misstatement due to fraud are not identified by
240 focus on the auditor, a possibility exists that management override of controls could occur
journal entries?
11. Three classifica- -standard recurring entries
tion of journal -non-standard entries
entries -top side entries
12. Steps to test jour- Step 1-Consider risks of material misstatement due to fraud & effect on journal
nal entries entry testing
Step 2-Obtain understanding of financial reporting process and controls over
journal entries
Step 3-Determine completeness of population
Step 4-Identify & select journal entries
Step 5-Perform journal entry audit procedures
, ACC 550 Exam 2
Study online at https://quizlet.com/_jeotpp
13. Typical Internal -Segregation of duties--authorization, posting, reviewing and reconciliation
Controls over -Authorization to record & approve journal entries
Journal Entries -Oversight of journal entry-posting process
-Regular testing of internal controls
14. Majority of Sig- Senior management
nificant Financial
Statement Fraud
involves...
15. Most individuals False
who engage in FS
fraud have had
prior history?
16. Determine com- -Normal accounting processes
pleteness of jour- -Manual entries
nal entries -Entire year
-Special focus on period-end entries
-Subsidiary ledgers
-General ledgers at subsidiaries
-Use CAAT techniques
17. which journal en- -Unrelated, unusual or seldom-used accounts
tries do you se- -Made by individuals who typically do not make entries
lect -Recorded at end of period
-Made at unusual times
-Round numbers or consistent ending numbers
-Unusual combinations of debits and credits
-Significant estimates or period-end adjustments
-Accounts prone to errors
-Accounts that have not been reconciled
Study online at https://quizlet.com/_jeotpp
1. Which is most financial reporting fraud
costly type of
fraud?
2. Fraud can be It cant be eliminated
eliminated by....
3. What is the dis- Intent
tinguishing fac-
tor between
fraud and error?
4. Who has pri- Those charged with governance and management
mary responsibil-
ity for prevention
and detection of
fraud?
5. Are auditors re- is responsible for obtaining reasonable assurance that the financial statements
sponsible for taken as a whole are free from material misstatement, whether caused by fraud
the detection of or error.
fraud?
6. Obtaining infor- Inquiry of management and those charged with governance, analytical proce-
mation needed dures during risk assessment, and fraud risk factors
to identify risks
of material mis-
statement due to
fraud includes
7. Key guidance -Importance of professional skepticism
from AU-C 240: -Fraud brainstorming
How to incorpo- -Obtaining information needed to identify risks of material misstatement due to
, ACC 550 Exam 2
Study online at https://quizlet.com/_jeotpp
rate fraud con- fraud
siderations into -assign personnel and supervise, taking into account fraud assessment
the audit -evaluate selection and application of accounting principles
-incorporate element of unpredictability into selection of audit procedures
8. PCAOB observa- -checklist approach
tions about fraud -lack of documentation inhibits review
detection by au- -failed to expand audit procedures
ditors -brainstorming session held too late
-session not attended by key members
-Failed to evaluate risk of management override
-analytical procedures not well-suited to detect fraud
9. Responses to - review accounting estimates for biases
address risk - evaluate the business rationale for significant unusual transactions
of management - test the appropriateness of journal entries and other adjustments
override
10. Why does AU-C Even if specific risks of material misstatement due to fraud are not identified by
240 focus on the auditor, a possibility exists that management override of controls could occur
journal entries?
11. Three classifica- -standard recurring entries
tion of journal -non-standard entries
entries -top side entries
12. Steps to test jour- Step 1-Consider risks of material misstatement due to fraud & effect on journal
nal entries entry testing
Step 2-Obtain understanding of financial reporting process and controls over
journal entries
Step 3-Determine completeness of population
Step 4-Identify & select journal entries
Step 5-Perform journal entry audit procedures
, ACC 550 Exam 2
Study online at https://quizlet.com/_jeotpp
13. Typical Internal -Segregation of duties--authorization, posting, reviewing and reconciliation
Controls over -Authorization to record & approve journal entries
Journal Entries -Oversight of journal entry-posting process
-Regular testing of internal controls
14. Majority of Sig- Senior management
nificant Financial
Statement Fraud
involves...
15. Most individuals False
who engage in FS
fraud have had
prior history?
16. Determine com- -Normal accounting processes
pleteness of jour- -Manual entries
nal entries -Entire year
-Special focus on period-end entries
-Subsidiary ledgers
-General ledgers at subsidiaries
-Use CAAT techniques
17. which journal en- -Unrelated, unusual or seldom-used accounts
tries do you se- -Made by individuals who typically do not make entries
lect -Recorded at end of period
-Made at unusual times
-Round numbers or consistent ending numbers
-Unusual combinations of debits and credits
-Significant estimates or period-end adjustments
-Accounts prone to errors
-Accounts that have not been reconciled
