Question

22. Which of the following factors most likely would heighten an auditor's concern about the risk of fraudulent financial reporting?

a..The audit committee's approval of the initial selection of accounting principles.

b..A lack of competition in the entity's industry, accompanied by increasing profit margins. c..Management's disclosure of unresolved litigation and contingent liabilities.

d..Year-end adjustments by the entity that significantly affect financial results

23. Which of the following factors most likely would cause an accountant not to accept an engagement to compile the financial statements of a nonissuer?

a..A lack of segregation of duties in the entity's accounting and payroll departments.

b..Indications that reports of asset misappropriation are not investigated by management.

c..The entity's intention to omit from the financial statements substantially all of the disclosures required by GAAP.

d..Management's acknowledgement that the financial statements will be included in a written personal financial plan

24. The risk that a client's financial statements are susceptible to material misstatements is

a. control risk

b. inherent risk

c. audit risk

d. none of the above

25. A system that stores transactions in a single database, but process them at various sites is referred to as

a. Centralized system.

b. Database management normalization system.

c. Decentralized system.

d. Distributed system

Answer 1

22. Option C is most suitable as Management's disclosure of unresolved litigation and contingent liabilities are mostly leading Auditors for speculations and concerned over it

23. Option C

24. Option B - Inherent risk is the susceptibility of an assertion to misstatement because of error or fraud

25.  Option A - Centralized System often stored,located and maintained at a location and accessed by various sites