CPA Auditing and Attestation (AUD) : Fraud vs Error
Study concepts, example questions & explanations for CPA Auditing and Attestation (AUD)
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Example Questions
Example Question #1 : Fraud Vs Error
Which of the following groups within an entity is typically in the best position to perpetrate a material fraud?
Customers
Management
Entry level personnel
Directors
Management
Management is typically in the best position to perpetrate a material fraud because management can override controls to manipulate accounting records and prepare fraudulent financial statements.
Example Question #1 : Fraud Vs Error
According to PCAOB standards which one of the following statements does not reflect a qualitative standard that should be considered when evaluating the materiality of an uncorrected misstatement or error?
The effects of misclassification
The significance of the misstatement
The dollar amount of the error
The cost of the correction
The dollar amount of the error
The dollar amount of the error does not reflect a qualitative standard that should be considered when evaluating the materiality of an uncorrected misstatement or error.
Example Question #1 : Fraud Vs Error
Misstatements discovered by an auditor were immaterial in the aggregate in prior years. Such misstatements should be:
Disclosed by the current year client’s financial statements
Considered in the current year evaluation of audit findings
Retested during the current year test of controls
Removed from the prior year summary because they were immaterial
Considered in the current year evaluation of audit findings
Misstatements discovered by an auditor were immaterial in the aggregate in prior years. Such misstatements should be considered in the current year evaluation of audit findings.
Example Question #2 : Fraud Vs Error
Prior to or during the information gathering procedures for an audit, team members should discuss the potential for material misstatement dur to fraud. Of the following, which best characterizes the mind set that the audit team should maintain during this discussion?
Judgemental
Presumptive
Questioning
Criticizing
Questioning
During an audit, the CPA should maintain an attitude of professional skepticism which includes a questioning mind and a critical assessment of audit evidence.
Example Question #3 : Fraud Vs Error
Of the following, which best characterizes the auditor's exercise of professional skepticism?
Taking past relationships and experiences with management into account
Obtaining adequate evidence in support of the fairness of financial statements
Conducting all fraud-related inquiries in a respectful manner
Having a questioning mind and attitude
Having a questioning mind and attitude
Professional skepticism is an attitude that includes a questioning mind and a critical assessment of audit evidence.
Example Question #6 : Fraud Vs Error
An employee at a company being audited may be more likely to commit fraud if he or she feels which of the following?
Pressure
Rationalization
Opportunity
All of the answer choices are correct
All of the answer choices are correct
These three factors in the fraud environment are the key components of the reasons someone would commit fraud.
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