Fradulent financial reporting, misappropriation of assets
________is an intentional misstatement or omission of amounts or disclosures with the intent to decieve users
fraudulent financial reporting
Because of financial risk of matieral misstatements due to fraud (fraud risk) an audit of FS in accordance with GAAS should be performed with an attitude of
Which of the following circumstances is most likely to cause an auditor to consider whether material misstatements due to fraud exist in an entity's FS?
Which of the following characteristics is most likely to heighten an auditors concern about the risk of material misstatements due to fraud in a entity's FS?
Which of the following circumstances is most likely to cause an auditor to increase the assessment of the rissk of material misstatment of the financial statements due to fraud?
When fraud risk factors are identified during an audit the auditor's documentation should include
The risk factors identified---the auditors response to the risk factors identified
If an independent audit leading to an opinion of FS causes the auditor to believe that a material misstatment due to fraud exists, the auditor should first
As a result of analytical procedures, the auditor determines that the gross profit percentage has increased from 30% in the preceding year to 40% in the current year. The auditor should
Cash recipets from sales on account have been missappropriated. Which of the following acts will conceal this embezzelment and be least likely to be deetected by the auditor?
An auditor discovers that a client's AR turnover is substanitally lower for the current year than for the prior year. This trend may indicate that
Which of the following internal controls will best detect the theft of valuable items from an inventory that consists of hundreds of different items selling for $1 to $10 and a few items selling for hundreds of dollars?
deliberate actions taken by management to meet earnings objectives
Form of earnings management in which revenues and expenses are shifted between periods to reduce flucuations in earnings
______is fraud that involves theft of an entity's assets
Misappropriation of assets
According to association of certified fraud examiners, the average company loses ______of its revenues to fraud
Represents three conditions for fraud arising from fraudulent reporting and misappropriations of assets- referred to as
Three conditions of the fraud triangle
Mangement or other employees have incentives or pressures to commit fraud
Circumstances provide opportunities for managment or employees to commit fraud
An attitude, character, or set of ethical values exists that allows management or employees to commit a dishonest act, or they are in an environement that imposes sufficent pressure that causes them to rationalize committing a dishonest acts
Entity factors that increase the risk of fraud
Fraud risk factors
When asked why exectutive fraud occurs, repondents overwhelming identify_____ and _____ as the top two reason
-Pressure to do "whatever it takes" to meet goals
-seek personal gain
Other factors from highest to lowest
-think "i wont get caught"
-they do not consider their actions fraudulent
-believe regulations are easily bypassed
-fear losing their job if goals are not met
- lack of resources causes corners to be cut
- lack of understanding of laws and regulations
_____provides guidance to auditors in assessing the risk of fraud
An attitude of thee auditor that neither assumes management is dishonest nor assumes unquestioned honesty
During audit planning, the engagement team must discuss the need to maintain a _______throughout the audit to identify fraud risks and critically evaluate audit evidence
Five sources of information to assess fraud risk
-Communications among audit team
-inquires of management
SAS 99 requires the audit team to conduct discussions to share insight and to brainstorm ideas that address the following
- How and where they believe the entity's FS might be suspectible to material mistatement due to fraud (external and internal)
- how mangement could perpetrate and conceal fradulent financial reporting
- how anyone might misappropriate assests of entity
- how auditor might respond to suspectibility of material mistatement due to fraud
SAS 99 requires auditors to make specific inquires of ______ and others within the company to provide information that otherwise might not be communicated