1
Q
- Factors that influence the level of fraud risk faced by an organization include which of the following?
a. The nature of the business
b. The effectiveness of the organization’s internal control
c. The ethics and values of the organization and the people in it
d. All of the above
A
d. All of the above (Correct)
2
Q
- _________ controls are designed to stop an undesirable event from occurring, whereas _________ controls are designed to identify an undesirable event that has already occurred.
a. Preventive; detective
b. Internal; external
c. Risk; discovery
d. Operating; review
A
a. Preventive; detective
3
Q
- The objective of a fraud risk assessment is to help management recognize factors that make an organization most vulnerable to fraud so that management can address those factors to reduce the exposure.
a. True
b. False
A
a. True
4
Q
- In general, management should avoid sharing the fraud risk assessment process and results with employees.
a. True
b. False
A
b. False
5
Q
- Fraudulent financial reporting risks include which of the following?
a. Payment of bribes or gratuities
b. Aiding and abetting of fraud by outside parties
c. Inappropriately reflected balance sheet amounts
d. Misappropriation of intangible assets
A
c. Inappropriately reflected balance sheet amounts
6
Q
- Effective internal controls can eliminate the need for a fraud risk assessment.
a. True
b. False
A
b. False
7
Q
- Which of the following factors should be considered when selecting a sponsor for the fraud risk assessment?
a. Seniority
b. Independence
c. Ability to elicit cooperation
d. All of the above
A
d. All of the above (Correct)
8
Q
- Which of the following factors should be considered in assessing the likelihood of occurrence of each fraud risk?
a. Financial statement and monetary significance
b. Internal control environment of the organization
c. Criminal, civil, and regulatory liabilities
d. Financial condition of the organization
A
b. Internal control environment of the organization
9
Q
- Management is not likely to have sufficient knowledge of controls to override them.
a. True
b. False
A
b. False
10
Q
- Risks resulting from ineffective or nonexistent controls are known as which of the following?
a. Residual risks
b. Inherent risks
c. Control risks
d. Audit risks
A
a. Residual risks
11
Q
- Assessing an area as having a high fraud risk means that fraud is occurring there.
a. True
b. False
A
b. False
12
Q
- Which of the following is not one of the three interrelated elements that enable someone to commit fraud?
a. Opportunity
b. Non-sharable financial need
c. Ability to rationalize
d. Fraud risk
A
d. Fraud risk
13
Q
- The results of a fraud risk assessment can help auditors design programs and procedures in a way that enables the auditors to look for fraud in known areas of high risk.
a. True
b. False
A
a. True
14
Q
- It is not important to consider reputation risk in performing a fraud risk assessment since this risk cannot easily be mitigated.
a. True
b. False
A
b. False
15
Q
- The vulnerability of an organization to those capable of overcoming the three elements of the fraud triangle is known as which of the following?
a. Inherent risk
b. Fraud risk assessment
c. Fraud risk
d. Control risk
A
c. Fraud risk
16
Q
- Which of the following is a type of detective control?
a. Segregating duties
b. Performing background checks
c. Performing surprise audits
d. Ensuring proper alignment between an individual’s authority and level of responsibility
A
c. Performing surprise audits
17
Q
- In assessing the significance to the organization of identified fraud risks, the fraud risk assessment team should first consider them on an inherent basis.
a. True
b. False
A
b. False
18
Q
- Which of the following information-gathering techniques enables the fraud risk assessor to observe the interactions of employees as they discuss a question or issue?
a. Interviews
b. Surveys
c. Focus groups
d. Anonymous feedback mechanisms
A
c. Focus groups
19
Q
- When assessing the potential incentives, pressures, and opportunities to commit fraud, the fraud risk assessment team should evaluate which of the following?
a. Incentive programs and how they may affect employees’ behavior when conducting business or applying professional judgment
b. Highly complex business transactions and how they might be used to conceal fraudulent acts
c. Opportunities for collusion
d. All of the above
A
d. All of the above (Correct)
20
Q
- Which of the following is not a true statement regarding the fraud risk assessment process?
a. It is more of a science than an art
b. To be most effective, it should be an ongoing, continuous process
c. It should be influenced by the culture of an organization
d. It is aimed at proactively identifying an organization’s vulnerabilities to fraud
A
a. It is more of a science than an art
21
Q
- Which of the following is not true regarding fraud risk?
a. It can be analyzed quantitatively
b. It results exclusively from sources internal to the organization
c. It can be analyzed qualitatively
d. It encompasses reputation risk
A
b. It results exclusively from sources internal to the organization
22
Q
- Which of the following is not a potential corruption risk?
a. Payment of bribes to public officials, companies, or private individuals
b. Inadequate disclosures pertaining to related-party transactions
c. Receipt of kickbacks, bribes, or gratuities
A
b. Inadequate disclosures pertaining to related-party transactions
23
Q
- Which of the following techniques can be used to evaluate the effectiveness and efficiency of internal controls?
a. Review of the accounting policies and procedures in place
b. Interviews with management and employees
c. Consideration of the risk of management’s override of controls
d. All of the above
A
d. All of the above (Correct)
24
Q
- Both management and auditors have a responsibility for fraud risk management.
a. True
b. False
A
a. True
25
25. Management should consider which of the following in establishing an acceptable level of fraud risk for the organization?
a. The organization’s business objectives
b. The organization’s risk tolerance level
c. Both A and B
d. Neither A nor B
c. Both A and B (Correct)
26
26. Which of the following factors enhances a fraud risk assessment?
a. Collaboration between management and auditors
b. Independence and objectivity of those leading and conducting the work
c. Inclusion of people’s perceptions at all levels of the organization
d. All of the above
d. All of the above (Correct)
27
27. One of the first steps in a fraud risk assessment involves identifying potential fraud risks inherent to the organization.
a. True
b. False
a. True
28
28. To maximize the effectiveness of the fraud risk assessment process, the fraud risk assessment team should include both facts and opinions in its report.
a. True
b. False
b. False
29
29. Which of the following actions might management take in order to transfer a residual fraud risk?
a. Eliminate the related asset
b. Exit the related activity
c. Purchase fidelity insurance
d. Implement countermeasures
c. Purchase fidelity insurance
30
30. Internal control is a process aimed at proactively identifying and addressing an organization’s vulnerabilities to internal and external fraud.
a. True
b. False
b. False
Fraud
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