WGU C254 Topic 2 Exam 2026 Questions
and Answers
In the past (early 20th century time-frame), what was the general consensus of the
principal purpose of audits (including among auditors)? - Correct answer-To detect
fraud
Why has there been so much frustration between the general public and auditors
regarding fraud detection? - Correct answer-The public wants all cases of fraud
detected, while auditors felt they only needed to be "reasonably certain" of its
absence.
Auditors can only say, with 100% certainty, that there is no fraud if they examine
every transaction. Otherwise, there will always be some measure of doubt. -
Correct answer-True
AICPA and the Cohen Commission (the commission on auditor's responsibility)
fought over something specific concerning the fall of Equity Funding in the 1970's.
This conflict highlighted a major communication issue between auditors and
financial statement users during much of the 20th century. What was this conflict
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, about? - Correct answer-How much responsibility should the auditor take when
endeavoring to detect (or fails to detect) fraud
In the beginning of the 20th century, everyone believed that the main purpose of
audits was to detect fraud. However, at this time, Standards on Audit Procedures
(SAP's) began to come forth, making it official that auditors really were
responsible for fraud, and that fraud detection was a priority second to none. -
Correct answer-False
SAP No. 1 actually began to define audits as more than just fraud detection. Since
then, audits never had has their principal purpose fraud detection.
What did Audit Standard No. 99 do that previous standards didn't? - Correct
answer-It establishes black and white standards to evaluate whether the auditor did
their job correctly, especially in their search for fraud.
Despite many attempts to close the "expectation gap" between auditors and the
public, the AICPA wasn't successful until SAS No. 99.
True or False - Correct answer-True
The idea "fraud" was not explicitly addressed until the 1990's. Fraud was addressed
as "errors and irregularities."
True or False - Correct answer-False
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and Answers
In the past (early 20th century time-frame), what was the general consensus of the
principal purpose of audits (including among auditors)? - Correct answer-To detect
fraud
Why has there been so much frustration between the general public and auditors
regarding fraud detection? - Correct answer-The public wants all cases of fraud
detected, while auditors felt they only needed to be "reasonably certain" of its
absence.
Auditors can only say, with 100% certainty, that there is no fraud if they examine
every transaction. Otherwise, there will always be some measure of doubt. -
Correct answer-True
AICPA and the Cohen Commission (the commission on auditor's responsibility)
fought over something specific concerning the fall of Equity Funding in the 1970's.
This conflict highlighted a major communication issue between auditors and
financial statement users during much of the 20th century. What was this conflict
©COPYRIGHT 2025, ALL RIGHTS RESERVE 1
, about? - Correct answer-How much responsibility should the auditor take when
endeavoring to detect (or fails to detect) fraud
In the beginning of the 20th century, everyone believed that the main purpose of
audits was to detect fraud. However, at this time, Standards on Audit Procedures
(SAP's) began to come forth, making it official that auditors really were
responsible for fraud, and that fraud detection was a priority second to none. -
Correct answer-False
SAP No. 1 actually began to define audits as more than just fraud detection. Since
then, audits never had has their principal purpose fraud detection.
What did Audit Standard No. 99 do that previous standards didn't? - Correct
answer-It establishes black and white standards to evaluate whether the auditor did
their job correctly, especially in their search for fraud.
Despite many attempts to close the "expectation gap" between auditors and the
public, the AICPA wasn't successful until SAS No. 99.
True or False - Correct answer-True
The idea "fraud" was not explicitly addressed until the 1990's. Fraud was addressed
as "errors and irregularities."
True or False - Correct answer-False
©COPYRIGHT 2025, ALL RIGHTS RESERVE 2
