Advanced Auditing Exam Solutions
Course Introduction
Advanced Auditing is an in-depth course designed to equip students with a comprehensive understanding of complex auditing concepts, frameworks, and practices. Building upon foundational auditing knowledge, the course delves into the application of advanced audit methodologies, risk assessment techniques, audit planning and execution, internal control evaluations, and the use of technology in audits. Students will analyze contemporary auditing issues such as forensic accounting, corporate governance, regulatory compliance, ethical considerations, and emerging risks in a dynamic business environment. Through case studies and real-world scenarios, students develop critical thinking and problem-solving skills necessary for addressing audit challenges and making informed professional judgments in both public and private sector organizations.
Recommended Textbook
Forensic Accounting 1st Edition by Robert Rufus
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12 Chapters
588 Verified Questions
588 Flashcards
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Page 2
Chapter 1: Introduction to the World of Forensic Accounting
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50 Verified Questions
50 Flashcards
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Sample Questions
Q1) All birds have wings.Kiwis have wings.Which of the following can be concluded using deductive reasoning?
A) Kiwis are birds.
B) No conclusion can be obtained.
C) All birds are Kiwis.
D) Kiwis can fly.
Answer: B
Q2) Which of the following exemplifies the role of an internal auditor?
A) Chloe classifies the transactions of Pole Star, Inc. and records it in the books of accounts.
B) Chloe reports on the sufficiency of the insurance policies taken out on the assets of Pole Star, Inc.
C) Chloe reports on the financial position of Pole Star, Inc. at the end of the accounting period.
D) Chloe assists the management of Pole Star, Inc. to determine the taxes and tax benefits..
Answer: B
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Chapter 2: The Legal Environment of Forensic Accounting
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Sample Questions
Q1) An expert's testimony is more credible than that of other witnesses.
A)True
B)False
Answer: True
Q2) Which of the following scenarios indicates the application of Rule 702 of the Federal Rules of Evidence?
A) The plaintiff engages Ali, an attorney, to represent them in court.
B) The attorney calls upon Riya, a construction engineer, to provide evidence on the structural sufficiency of a building.
C) Pete, a store-owner, appears as a witness to give testimony on a robbery committed outside his store.
D) The court calls on Fiona, a forensic accountant, to give a statement on the accident that caused damage to her car.
Answer: B
Q3) In the case of a jury trial,the trial stage begins with the selection of a jury.
A)True
B)False
Answer: True
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Chapter 3: Screening and Staging Engagements
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50 Verified Questions
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Sample Questions
Q1) Which of the following is generally covered in an engagement letter?
A) research plan
B) deadlines given by the court
C) evidence required to be gathered
D) right to terminate
Answer: D
Q2) Which of the following can help in identifying a potential conflict of interest?
A) reviewing the subject complaint
B) engaging the services of a detective
C) assessment of the jury
D) statements made by the attorney and expert
Answer: A
Q3) Which of the following is a reason for rejecting an engagement in which conflicts of interest has been identified?
A) It leads to disagreements between an attorney and an expert.
B) It impairs independence and objectivity of the forensic accountant.
C) It results in disclosure of confidential or sensitive information.
D) It undermines the attorney-client privilege.
Answer: B
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Page 5
Chapter 4: Gathering Evidence Interviews and Observations
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Sample Questions
Q1) Legal observations can be considered a type of public record.
A)True
B)False
Q2) Which of the following types of questions are used to by the interviewer to make the interviewee comfortable and to create a connection?
A) review questions
B) informational questions
C) introductory questions
D) closing questions
Q3) Which of the following is characteristic of a formal interview?
A) It is unsystematic in nature.
B) It is generally used in the early stages of a forensic accounting engagement, when there is insufficient information to develop an informal interview.
C) It is not controlled by a specific set of detailed questions.
D) It mostly begins with structured questions and progresses to open-ended questions.
Q4) Compared to visual observations,auditory observations are more limited.
A)True
B)False
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Chapter 5: Financial Statements Analysis Reading
Between the Lines
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Sample Questions
Q1) Which of the following is true of the compound annual growth rate?
A) It reflects average annual growth over a period of multiple years.
B) It reflects total annual growth over a period of multiple years.
C) It reflects average annual growth for a year as compared to the previous year.
D) It reflects total annual growth for a year as compared to the previous year.
Q2) Which of the following is one of Michael Porter's five competitive forces?
A) the bargaining power of suppliers
B) the bargaining power of the government
C) the threat of industrial slowdown
D) the threat of technological obsolescence
Q3) Personal balance sheet provides a snapshot of an individual's financial condition at a specific point in time.
A)True
B)False
Q4) Content analysis is a quantitative method of determining characteristics of interest.
A)True
B)False
Q5) What is content analysis?
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Chapter 6: Fraud and White-Collar Crime
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Sample Questions
Q1) Which of the following explains is the underlying proposition of fraud diamond?
A) Integrity, reflected in one's decisions, influences deviant behavior.
B) If incentive is present in an act, the suspect's capacity does not matter.
C) A suspect's capacity, not incentive, should be considered by the forensic accountant.
D) In addition to pressure, opportunity, and rationalization, offenders also need the capability to commit the act.
Q2) Which of the following propositions is reflected by the calculus of fraud?
A) Individuals will commit fraud when the reward is lower than the product of the probability of getting caught and the perceived gravity of the loss.
B) Individuals will commit fraud when the product of the probability of getting caught and the perceived gravity of the loss is greater than the reward.
C) Individuals will commit fraud when the product of the probability of getting caught and the perceived gravity of the loss is lesser than the reward.
D) Individuals will commit fraud when the perceived gravity of the loss is greater than the product of the probability of getting caught and the reward.
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Chapter 7: Conducting a Fraud Investigation
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35 Verified Questions
35 Flashcards
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Sample Questions
Q1) What are the two alternative dispute resolution strategies which are available?
Q2) Which of the following is a characteristic of fraudulent journal entries?
A) These contain exact numbers or inconsistent ending numbers.
B) These are generally recorded at the beginning of the period.
C) These are made to regularly used accounts.
D) These are applied to intercompany or related parties.
Q3) Under the periodic inventory method
A) inventory account is used to record the changes in inventory.
B) cost of goods sold is recorded after each purchase.
C) beginning inventory remains unchanged during the period.
D) inventory account is adjusted only once in three accounting periods.
Q4) Which of the following statements comparing alternative dispute resolution (ADR)with litigation is true?
A) ADR is more expensive than litigation.
B) ADR is more time-consuming than litigation.
C) Litigation is public whereas ADR maintains privacy.
D) Litigation has complete flexibility whereas ADR has limited flexibility.
Q5) What are the common characteristics of fraudulent journal entries outlined in SAS No.99?
Q6) Fraud is not an accounting problem - it is a social phenomenon.Explain.
Page 9
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Chapter 8: Transforming Data Into Evidence
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Sample Questions
Q1) Which of the following is a purpose of document dumping?
A) to get rid of unnecessary and outdated documents and retain only those documents that are relevant
B) to conceal relevant and vital information from being tracked by the forensic accountants
C) to destroy material documents that contain important data
D) to make the document of interest more difficult to identify
Q2) Which of the following is true with regard to identifying themes while transcribing interviews?
A) For less-structured interviews, themes could be based on experiences, behaviors, views, or any other factor that becomes apparent.
B) Interview questions are a good starting point for identifying themes if the interview was semi-structured in nature.
C) In a fact-finding interview, themes may simply emerge from the flow of conversation.
D) The themes identified for the structure of the transcript may not always be in consistence with the objectives of the engagement.
Q3) Why is it important to define the universe of data?
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Chapter 9: Transforming Data Into Evidence
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Sample Questions
Q1) What are add-ins? What are the common add-ins that can be used with Excel?
Q2) Which of the following is the first step in creating a histogram?
A) plotting the data
B) determining frequency of observations
C) defining the intervals
D) analyzing the data
Q3) What does a positively skewed distribution mean?
A) The distribution is more heavily weighted toward larger numbers.
B) The median is lower than the mean, which is lower than the mode.
C) The distribution extends farther to the left than to the right.
D) The mean is greater than the median, which is greater than the mode.
Q4) Which of the following is true of data mining?
A) Sorting is a form of data mining.
B) Data mining cannot be used for investment analysis.
C) Ratio analysis is a form of data analysis, not data mining.
D) Data mining can be used to identify all types of fraud.
Q5) A bar graph cannot be used to chart multiple time series.
A)True
B)False
Q6) Explain how a continuous distribution differs from a discrete distribution.
Page 11
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Chapter 10: Professional Responsibilities
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53 Verified Questions
53 Flashcards
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Sample Questions
Q1) Steven Smith has been engaged by a counsel to assist a fellow CPA in an accounting malpractice action against Krynton Company.Five years back,Steven's wife used to work as finance manager for Krynton.During the engagement,Krynton warned Steven that his wife will be sued for financial treachery if the prevailing accounting malpractice action is ruled against the company.Which of the following is the threat faced by Steven Smith as per AICPA's Guide for Complying with Rules 102-505 (2008)?
A) familiarity threat
B) advocacy threat
C) undue influence threat
D) self-review threat
Q2) The purpose of the AICPA's Code of Professional Conduct is to
A) induce the accountants through guidance, rules, interpretations, and rulings to join the AICPA.
B) help AICPA members monitor their own behavior.
C) employ the degree of knowledge, skill, and judgment possessed by a rational individual.
D) fulfil all the client requirements included in the engagement agreement.
Q3) Explain the sequence of actions to be followed to reconcile inconsistencies in various organizational standards.
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Page 12
Chapter 11: Fundamentals of Business Valuation
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Sample Questions
Q1) Prospective data are more commonly used to value closely held companies.
A)True
B)False
Q2) Which of the following is true of capitalization?
A) It is the same as discounting.
B) It is more commonly used with prospective data.
C) It is applied to a single benefit stream.
D) It converts present values to future benefits.
Q3) A valuation performed in litigation must conform to the reporting provisions of professional standards.
A)True
B)False
Q4) The NAV method determines a company's value as the difference between the book value of its assets and the fair market value of its liabilities.
A)True
B)False
Q5) Excluding valuation discounts allows for a more equitable determination of fair value.Substantiate.
Q6) Why is identification of the ownership interest to be valued important?
Page 13
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Chapter 12: Special Topics
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Sample Questions
Q1) Although high-quality municipal bonds are the most common proxy for a risk-free rate,Treasury bonds are another alternative.
A)True
B)False
Q2) The purpose of a ________ in computer forensics is to detect and recover data that has been concealed on a computer system.
A) file analysis
B) timeframe analysis
C) hidden data analysis
D) active data analysis
Q3) In computer forensics,the chain of custody describes the route evidence takes from the time it is collected until the investigation is completed and identifies everyone that had access to it along the way.
A)True
B)False
Q4) What is a method of proof? Briefly explain the difference between a direct and an indirect method of proof.
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