Auditing Mock Exam
Course Introduction
Auditing is a comprehensive course designed to introduce students to the fundamental concepts, principles, and procedures of auditing within the context of accounting and financial reporting. The course covers topics such as audit planning, evidence collection, risk assessment, internal controls, and ethical responsibilities of auditors. Students learn about both internal and external audits, the legal and regulatory environment, auditing standards, and report preparation. Through case studies and practical exercises, the course emphasizes the importance of professional skepticism, critical thinking, and effective communication in ensuring the reliability and integrity of financial information.
Recommended Textbook Fraud Examination 3rd Edition by W. Steve Albrecht
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Page 2
Chapter 1: The Nature of Fraud
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Sample Questions
Q1) The burden of proof in a criminal case must be
A) "Beyond a Reasonable Doubt"
B) A "Preponderance of Evidence"
Answer: A
Q2) Which of the following federal law enforcement agencies is involved in fighting fraud?
A) DEA
B) US Marshals
C) CIA
D) ATF
E) ACFE
Answer: B
Q3) In a Ponzi scheme, how is confidence in the perpetrator established?
A) By obtaining a written note from an auditor that "validates" the services
B) By issuing notarized certificates
C) By initially paying returns on investments
D) Confidence does not need to be established for a Ponzi scheme to be successful
Answer: C
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3
Chapter 2: Why People Commit Fraud
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Sample Questions
Q1) Modeling and labeling are sub-components of which control structure component:
A) Control environment.
B) Accounting system.
C) Control procedures.
Answer: A
Q2) Which of the following is not considered a control environment issue?
A) Management philosophy and operating style
B) Effective hiring procedures
C) Clear organizational structure
D) High debt to equity ratio
Answer: D
Q3) People who commit fraud are most similar to which of the following groups?
A) Burglars
B) College students
C) Convicted murderers
D) Police officers
Answer: B
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Page 4
Chapter 3: Fighting Fraud: An Overview
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Sample Questions
Q1) Research indicates that fraud occurs less frequently when employees have feelings of ___________ toward their organization than when they feel abused, threatened, or ignored.
A) Tenure
B) Avoidance
C) Ownership
D) Responsibility
Answer: C
Q2) Which of the following is (are) the primary ways to detect fraud?
A) By chance
B) By proactively searching for symptoms of fraud
C) By encouraging early recognition of symptoms
D) By asking all employees if they know of any fraud
Answer: A
Q3) An example of kickback fraud is:
A) Fraud perpetrated by an employee and the vendor
B) Fraud perpetrated by two or more employees
C) Fraud that conceals cash shortages by transferring funds
D) None of the above
Answer: A
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Chapter 4: Preventing Fraud
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Sample Questions
Q1) Fraud is most commonly detected through __________.
A) Tips
B) Advances in technology
C) Confessions
D) Internal audits
Q2) Which elements of the fraud triangle need to come together before fraud is likely to occur?
A) Perceived pressure and perceived opportunity
B) Perceived opportunity and rationalization
C) Perceived pressure and rationalization
D) All elements must be present
Q3) Which of the following is not a possible fraud prevention strategy/technique?
A) Including "right-to-audit" clauses on purchase invoices.
B) Instigate a zero tolerance policy with regards to fraud in the workplace.
C) Effectively screen potential employees.
D) All of the above are possible fraud prevention strategies/techniques.
Q4) True or false: The majority of frauds committed against companies involve collusion.
A)True
B)False
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Chapter 5: Recognizing the Symptoms of Fraud
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Sample Questions
Q1) Common examples of analytical anomalies include all of the following except:
A) Irregularities in source documents
B) Unexplained inventory shortages or adjustments
C) Excess purchases
D) Excessive late charges
Q2) Common accounting anomalies involve problems with
A) Faulty journal entries
B) Source documents
C) Both A & B
D) Neither A nor B
Q3) People who can delay gratification rarely embezzle.
A)True
B)False
Q4) The auditors' main goal of matching documents is to:
A) Determine whether support exists and is adequate
B) Determine whether the documents are real or fraudulent
C) Determine whether the expenditures make sense
D) Determine whether all aspects of the documentation are in order
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Chapter 6: Data-Driven Fraud Detection
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Sample Questions
Q1) All of the following are red flags of the existence of kickbacks except:
A) The purchaser gains greater control over the vendor
B) Prices increase
C) Volume with the kickback vendor increases
D) Quality from the kickback vendor decreases
E) All of the above are red flags of the existence of kickbacks
Q2) Benford's Law is:
A) An algorithm that predicts the probability of fraud within the company.
B) A tool that converts financial statements to percentages
C) An algorithm that accurately predicts the probability of selected digits of groups of numbers in a random sample.
D) The number of dollars of borrowed funds for every dollar invested.
Q3) True or false: Spreadsheets are not very useful in analyzing large amounts of data.
A) True
B) False
Q4) A Matasos matrix allows a user to combine different indicators to different schemes.
A)True
B)False
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Chapter 7: Investigating Theft Acts
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Sample Questions
Q1) Invigilation is
A) A theft investigation technique that analyzes physical evidence
B) A theft investigation technique that closely supervises suspects closely
C) A type of undercover operation
D) Interviewing the suspect at the beginning of the investigation
Q2) Which of the following is the last step in an investigation?
A) Interview suspect
B) Interview former employees
C) Interview other buyers or co-workers
D) Invigilation
Q3) Which investigation technique relies on a person's senses, especially hearing and seeing?
A) Invigilation
B) Surveillance and covert operations
C) Computer-based searches
D) Honesty testing
Q4) Surveillance is usually used to investigate
A) Theft acts
B) Concealment
C) Conversion
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Chapter 8: Investigating Concealment
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Sample Questions
Q1) Documents are a great source of evidence because of the following:
A) They do not forget
B) They cannot be cross-examined or confused by attorneys
C) They cannot commit perjury
D) They never tell inconsistent stories of different occasions
E) All of the above
Q2) Which of the following does not appear on a check, which has been cashed?
A) Teller number
B) Date
C) Transaction number
D) Time of the transaction
Q3) Which of the following is a common method used by auditors to look for the existence of fraud?
A) By asking clients about past fraud experiences
B) By gathering documentary evidence and checking for fraud symptoms
C) By conducting anti-fraud training sessions for all employees
D) None of the above
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Chapter 9: Conversion Investigation Methods
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Sample Questions
Q1) All of the following information can be obtained from an Internet search, except:
A) Criminal records
B) How many traffic tickets a person has
C) Birth records
D) A perpetrator's purchase of expensive jewelry
Q2) Evidence gathered from searching through someone's trash:
A) Can help identify concealment attempts
B) Can help to determine how a perpetrator is spending stolen money
C) Can help understand how a perpetrator is stealing money
D) All of the above are true
Q3) The Gramm-Leach Bliley Act prohibits
A) Telemarketers selling information to corporations
B) The use of false pretenses to access the personal information of others
C) Public access to FBI criminal database
D) None of the Above
Q4) True or false: A net worth calculation usually yields a conservative estimate of stolen funds that is readily accepted as evidence in court.
A)True
B)False
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Chapter 10: Inquiry Methods and Fraud Reports
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Sample Questions
Q1) Use of the following methods will help an interviewer deal with difficult people, except:
A) Disarm the interviewee using surprise
B) Change tactics
C) Make it hard to say "No"
D) Don't react
E) All of the above are useful in dealing with difficult people
Q2) Which is not a verbal clue that would place suspicion on an interviewee?
A) Frequent reference to good character
B) Eagerness to end the interview
C) Avoidance of emotionally charged terms
D) Answering with a question
E) All of the above are suspicious verbal clues
Q3) Which of the following is not a characteristic of a good interview?
A) The interview is of sufficient length and depth to get relevant facts
B) The interview quickly gets to the focus
C) Interview is conducted as far away from the event as possible
D) Interviewer avoids unnecessary facts
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12
Chapter 11: Financial Statement Fraud
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Sample Questions
Q1) According to the COSO's study of financial statement frauds, who is the most common perpetrator of financial statement fraud?
A) Chief Executive Officer
B) Chief Financial Officer
C) Chief Operating Officer
D) Controller
Q2) The termination of an auditor-auditee relationship can be caused by all but which of the following?
A) Failure of the client to pay
B) Auditor-auditee disagreement
C) Auditor's suspicion of fraud
D) State government mandate to break long term audit relationships
Q3) In addition to changes in financial statements, which of the following can indicate financial statement fraud has occurred?
A) Information in the footnotes to the financial statements.
B) Dividend payout ratios.
C) Management's discussion and analysis.
D) Auditor reports.
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Chapter 12: Revenue- and Inventory-Related Financial
Statement Frauds
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Sample Questions
Q1) Which of the following is not a typical behavioral or verbal symptom of revenue fraud?
A) Inconsistent or vague responses from management arising from revenue inquiries
B) Denied access to facilities, employees, or records related to revenue-related audit evidence
C) Unusual delays by the entity in providing revenue-related information
D) Untrue responses by management to queries about revenue-related accounts
E) All of the above are typical symptoms
Q2) When analyzing ratios, what is typically the most important aspect to evaluate?
A) the size of the ratio
B) the direction of the ratio
C) the change in the ratio
D) the complexity of the ratio
Q3) Benford's law would most likely assist an auditor when looking for:
A) Analytical symptom
B) Accounting symptom
C) Control symptom
D) Lifestyle symptom
E) None of the above
14
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Chapter 13: Liability, Asset, and Inadequate Disclosure
Frauds
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Sample Questions
Q1) When examining whether a company has under recorded accounts payable, each of the following ratios will be helpful except:
A) Acid-test ratio
B) Accounts Payable ÷ Purchases
C) Accounts Payable ÷ Cost of Goods sold
D) Unearned revenue ÷ Accounts Payable
E) Current Ratio
Q2) Which of the following are ways/opportunities to overstate assets?
A) In mergers and restructuring
B) Through inter-company accounts
C) In accounts receivable and inventory
D) All of the above
Q3) With many financial statement frauds, (Net Income-Cash from Operations)/Total Assets will _________ over time:
A) Stay around zero.
B) Be positive.
C) Be negative.
D) Can't be determined.
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Chapter 14: Fraud Against Organizations
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Sample Questions
Q1) Claiming personal travel as a business expense, altering a receipt to reflect a higher amount than was actually paid, or submitting fictitious receipts is an example of a:
A) Billing scheme
B) Check tampering
C) Register-disbursement scheme
D) None of the above
Q2) According to the text, which of the following is the least costly of all disbursement schemes?
A) Check tampering schemes
B) Personal expense schemes
C) Billing schemes
D) Payroll schemes
Q3) A conflict of interest exists when
A) An employer knows of an employees interest in a business deal or negotiation
B) An employee's interest in a transaction is undisclosed
C) Employees offer, give, receive or solicit anything of value in order to influence an official act
D) Employees demand payments from vendors for deciding in the vendors' favor
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Chapter 15: Consumer Fraud
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Sample Questions
Q1) Snake Oil plans are plans that usually include:
A) Animal byproducts
B) Miracle products
C) Internet-based, service products
D) Immaterial products
Q2) Common identity theft methods include all of the following, except:
A) Filing for bankruptcy in the victim's name
B) Opening new bank accounts in the victim's name
C) Changing a victim's mailing address
D) Destroying personal property, such as a home or car
Q3) Identity theft is used to describe those circumstances when someone uses another person's:
A) Name and/or address
B) Bank account information
C) Social security information
D) All of the above
Q4) Multi-level Marketing Companies are illegal in the United States.
A)True
B)False
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Chapter 16: Bankruptcy, Divorce, and Tax Fraud
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Sample Questions
Q1) Bankruptcy judges perform all of the following functions except
A) Approve reorganization plans
B) Conduct hearings and trials to resolve disputes
C) Appoint fraud examination firms to conduct audits
D) Award professional fees
E) Bankruptcy judges perform all of the above functions
Q2) Who holds a valid claim against someone filing a chapter 11 bankruptcy?
A) Examiner
B) Debtor
C) Creditor
D) Adjuster
Q3) Which is the type of bankruptcy that allows large companies to reorganize themselves and pay off debt in the future?
A) Chapter 3
B) Chapter 5
C) Chapter 7
D) Chapter 11
E) Chapter 13
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Chapter 17: Fraud in E-Commerce
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Sample Questions
Q1) The best way to reduce fraud in an e-business environment is to focus on _______?
A) Customer transactions
B) Reducing opportunities through the implementation of appropriate internal controls
C) Designing new fraud-proof technologies
D) Apply Benford's law
Q2) According to the book, which 3 of the 5 traditional internal control elements are most important in ebusiness transactions?
A) Control environment, risk assessment and monitoring
B) Risk assessment, control activities and information & communication.
C) Control environment, risk assessment and control activities
D) Control activities, information & communication and monitoring.
Q3) Which of the following poses a larger risk in an e-commerce environment than in a traditional environment?
A) Pilferage
B) Theft of money
C) Data theft
D) Employee fraud
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19
Chapter 18: Legal Follow-Up
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Sample Questions
Q1) In every civil case there are four basic stages. Which of the following is not one of the basic stages?
A) Investigation and pleadings
B) Discovery
C) Motion practice and negotiation
D) All are correct
Q2) During the deposition, good expert witnesses should do all of the following except:
A) Listen carefully to the questions to make sure they hear exactly what is being asked
B) Voluntarily talk about something that is important but the attorney didn't ask
C) Before answering, experts pause to give the attorneys for their side an opportunity to object to the question.
D) Not to answer specific questions if instructed by their attorneys.
Q3) Depositions are part of the _________ in the litigation process.
A) Investigation and pleadings phase
B) Discovery phase
C) Motion practice and negotiation phase
D) Trial and appeal phase
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