Question

1.It is management’s responsibility to ensure that financial statements are fairly and truthfully presented.

True

False

2.Generally speaking, the existence of related party transactions ________.

-decreases inherent risk and should be investigated further

-is illegal and should be reported to the Securities and Exchange Commission

-is not worth of further investigation

-increases inherent risk and should be investigated further

3.Analytical procedures are conducted during the risk assessment phase of the audit to ________.

-aid in the elimination of risk

-identify accounts at risk of material misstatement

-highlight normal fluctuations in accounts

-complete the audit work

4.In the context of fraudulent financial reporting, which would most likely represent a risk factor?

-Low employee turnover at senior management levels

-Revenue expectations from management have increased slightly from the prior year

-High degree of competition in the particular industry

-The structure of the company includes subsidiary companies

5.Which of the following is not a fraud risk factor?

-An incentive or pressure to commit fraud

-An opportunity to commit fraud

-Amount of ethics training provided by the company

-Rationalization to justify fraudulent actions