1) Which of the following is true about fraud auditing:
a) The fraud triangle is a useful tool for evaluating the root causes of fraud
b) Most frauds are not detected by internal auditors
c) A fraud investigation does not have to be performed for every call to the whistleblower hotline.
d) Some auditors are better suited to be fraud auditors than others.
e) All of the above are true
2) Vouching involves tracing forward from one document to another subsequently prepared document.
a) True
b) False
3) Which of the following is true about corruption
a) The internal auditor needs to be aware of legislation such as the Foreign Corrupt Practices Act
b) Corruption schemes represent a minority of all frauds
c) Information and technology risks can expose a company to corruption
d) The Corruption Perception Index can assist organizations in prioritizing their anti-corruption efforts in areas of the world at greatest risk.
e) All of the above are true
4) As a general rule which of the following is true about audit evidence:
a) Evidence obtained directly by internal auditing is more reliable than evidence obtained indirectly
b) Evidence from within the company is more reliable than evidence obtained from third parties
c) Obtaining more of the same type of evidence can compensate for poor quality of that evidence
d) There is no relationship between the quantity and quality of evidence required
e) None of the above is true
5) Which of the following is a barrier to implementing data analysis technologies?
a) Initial product acquisition cost
b) Expertise within the internal auditing department
c) Ongoing maintenance and support costs
d) Lack of IT support
e) All of the above are barriers
6) Which of the following is true about the sufficiency of audit evidence?
a) It deals with the relevance of evidence
b) It deals with the reliability of evidence
c) It deals with the quantity of evidence
d) The auditor is expected to be an expert in document authentication
e) A and B are true
7) Which of the following is not a disadvantage of interviewing?
a) The interviewer may not be properly trained
b) The auditor may make the person being interviewed uncomfortable or defensive
c) The person being interviewed may not understand the process
d) The evidence provided may be biased
e) All of the above are disadvantages
8) Which of the following is a disadvantages of using observation to gather audit evidence?
a) Personnel being observed may alter their behavior
b) It is difficult to get large numbers of observations
c) Information collected is not current
d) Audit personnel get to interact with operations personnel
e) Both a and b
9) Which audit procedure requires that evidence be obtained from a third party?
a) Reperformance
b) Confirmation
c) Inspection
d) Observation
e) Vouching
10) An internal auditor can draw a statistical inference from a haphazard sample.
a) True
b) False
11) For each control selected for testing, the internal auditor requires the same quality and quantity of audit evidence.
a) True
b) False
12) Which of the following involves examining trends and relationship among financial and non-financial data?
a) Vouching
b) Confirmation
c) Analytical procedures
d) Reperformance
e) Tracing
13) Internal auditing's responsibilities with respect to fraud are limited to:
a) Accountability for ensuring that all employees are trained in fraud prevention
b) Strictly to financial reporting matters
c) Being aware of fraud indicators but not necessarily being a fraud expert
d) Implementing internal controls to prevent or detect fraud
e) The internal auditor has no role in fraud prevention or detection
14) According to the ACFE, which of the following is not true?
a) Most frauds are committed by people who have previously engaged in fraudulent activity
b) Perpetrators with high level of authority cause larger losses
c) The majority of fraud schemes deal with financial reporting
d) Most frauds are detected by employee tips
e) Both a and c
15) Which of the following is not a best practice in addressing IT fraud risk?
a) Security awareness training for employees
b) Restricting access to need to know
c) Not outsourcing IT
d) Deactivating computer access when an employee leaves
e) None of the above
16) A data analysis technique which uses the expected frequencies of the digits in tabulated data is called
a) Monte Carlo Analysis
b) Simulation
c) Benford's Law
d) Regression Analysis
e) Financial modelling
17) Which of the following is true about fraud prevention and detection?
a) An organization may choose to design its controls to detect, rather than prevent, certain fraud risks
b) The IIA requires that an organization have a zero tolerance policy for fraud
c) Third-party reviews are not a part of a fraud prevention and detection program
d) The IIA requires that fraud prevention be monitored on a continuous basis by an independent entity.
e) All of the above are true
18) Which of the following is not a behavioral red flag?
a) Never taking vacations
b) Staying with one employer for a career
c) Close associations with vendors
d) Unwillingness to share duties with others
e) Excessive family or peer pressure to be successful
19) For a fraud detection program to be effective it is preferable to sample data because a statistical valid conclusion can be drawn.
a) True
b) False
20) If several red flags are detected, it means a fraud has occurred.
a) True
b) False
21) Which of the following would not be part of a fraud risk assessment?
a) Implementing risk responses
b) Assessing the likelihood and significance of inherent fraud risk
c) Getting input from individuals throughout the organization who have different perspectives
d) Brainstorming on how internal controls could be circumvented
e) Assessing the incentives, pressures, and opportunities to commit fraud.
22) Which are the following is not an element of the fraud triangle
a) Rationalization
b) Opportunity
c) Risk response
d) Incentive
e) All of the above are elements of the fraud triangle
23) According to the ACFE, which of the following is an example of asset misappropriation?
a) Overstating liabilities
b) Invoice kickbacks
c) Ghost employees
d) Recording fictitious revenues
e) Both c and d
24) There is no IPPF Standard dealing exclusively with fraud.
a) True
b) False
25) With the widespread use of audit software, there are no longer any advantages to doing statistical sampling.
a) True
b) False
ESSAYS
26) Generalized Audit Software
You are assigned to work on an audit of shipping and billing as the generalized audit software expert. The objectives of your part of the audit are as follows:
a. Sales orders are accepted only within authorized credit limits.
b. Past due open orders are monitored and addressed on a timely basis.
c. All products shipped are invoiced to the customer within two business days.
d. Prices and terms on the customer invoice are correct
Describe a specific test you would perform using your generalized audit software tool to provide audit evidence in support of each of the above objectives. I don't want manual procedures. Note vouching, tracing and analytical procedures are not specific tests. Briefly describe the logic of the computer programs needed to generate the necessary output.
27)
Briefly describe the audit evidence the auditor should gather to support each of the following:
a) Ownership of fixed assets
b) Accuracy of accounts receivable
c) Physical existence of inventory
d) Obsolescence of inventory
e) Accuracy of the depreciation expense journal entry
28) How can internal auditing help the audit committee assess and respond to the risk of fraud from management override of internal controls?