1. 2. a. c. Which of the following is least likely to be required on an audit? Evaluate the business rationale for significant, unusual transactions, b. Make a legal determination of whether fraud has occurred. c. Review accounting estimates for biases d. Test appropriateness of journal entries and adjustment Which of the following is most likely to be an overall response to fraud risks identified in an audit? Only use certified public accountants on the engagement. b. Place increased emphasis on the audit of objective transactions rather than subjective transactions. Supervise members of the audit team less closely and rely more upon judgment. d. Use less predictable audit procedures. Which of the following is least likely to be included in an auditor's inquiry of management while obtaining information to identify the risks of material misstatement due to fraud? Are financial reporting operations controlled by and limited to one location? b. Does it have knowledge of fraud or suspect fraud? Does it have programs to mitigate fraud risks? Has it reported to the audit committee the nature of the company's internal control? Individuals who commit fraud are ordinarily able to rationalize the act and also have an 3. a. c. d. 4. Incentive Yes Yes No b. Opportunity Yes No Yes No d No 5. What is an auditor's responsibility who discovers senior management is involved in what is financially immaterial fraud? a. Report the fraud to the audit committee. b. Report the fraud to the Public Company Accounting Oversight Board. c. Report the fraud to a level of management at least one below those involved in the fraud. d. Determine that the amounts involved are immaterial, and if so, there is no reporting responsibility