1. Error includes a. Engaging in complex transactions that are structured to misrepresent the financial position or financial performance of the entity b. Concealing or not disclosing facts that could affect the amounts recorded in the financial statements c. An incorrect accounting estimate arising from oversight or misinterpretation of facts d. Intentional misapplication of accounting policies relating to amounts, classification, manner of presentation and disclosure

2. Fraud involves one or more members of management or those charge with governance is referred to a. Management fraud c. Fraudulent financial reporting b. Employee fraud d. Misappropriation of assets

3. The auditor is concerned with fraud that causes a material misstatement in the financial statements. There are two type of intentional misstatement that are relevant to the auditor, misstatement arising from fraudulent financial reporting and misstatement arising from a. Management fraud c. Misappropriation of asset b. Employee fraud d. Collusion within the entity or with third parties

4. The primary responsibility for the prevention and detection of fraud rests with a. Those charged with governance of the entity b. Management of the entity c. Both A and B d. The auditor

5. Which of the following statement best describes an auditor responsibility regarding misstatement a. An auditor should obtain reasonable assurance that the financial statement taken as a whole are free from material misstatement whether caused by fraud or error b. An auditor shall obtain an absolute assurance that material misstatement in the financial statements will be detected c. An auditor is responsible to detect material errors but has no responsibility to detect material fraud that is concealed through employee collusion or management override of internal control d. An auditor failure to detect a material misstatement resulting from fraud is an indication of noncompliance with the requirements of the standards

6. When obtaining an understanding of the entity and its environment, including its internal control, the auditor may identify events or conditions that indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Such events or conditions are referred to as a. Fraud conditions b. Fraud risk factors c. Fraudulent activities d. Fraud environment

7. Opportunities to misappropriate asset increase when there a. Known or anticipated future employee layoff b. Promotions, compensation or other rewards inconsistent with expectations c. Recent or anticipated changes to employee compensation or benefit plan d. Inventory items that are small in size of high value or in high demand

8. Because of the risk of material misstatement, an audit of financial statements in accordance with standards should be planned and performed with an attitude of a. Impartial conservatism c. Independent integrity b. Objective judgment d. Professional scepticism

9. When planning the audit, auditor should make inquiries of management. Such inquiries should address the following except a. Management assessment of the risk that the financial statements maybe misstated b. Management process for identifying and responding to the risk of fraud in the entity c. Management consideration of how an element of unpredictability will be incorporated into the nature, timing and extent of the audit procedures to be performed d. Management communication if any to those charged with governance regarding its processes for identifying and responding to the risk of fraud in the entity

10. When the auditor identifies misstatement in the financial statements, the auditor should consider whether such misstatement may be an indicator of fraud and of there is such, the auditor should a. Consider the implication of the misstatement in relation to other aspect of the audit b. Withdraw from the engagement c. Communicate the information to regulatory and enforcement authorities d. Report the matter to the person or persons who made the audit appointment

11. Documentation standard requires the auditor to document matters which are important in providing evidence to support the audit opinion, and state that the working papers include the auditor reasoning on all significant matter which requires the auditor judgment, together with the auditor conclusion thereon. Which of the following should be documented by the auditor a. Fraud risk factors identified as being present during the auditor risk assessment process b. Auditor responses to identified risk factors c. Both fraud risk factors identifi9ed as being present during the auditor risk assessment process and the auditor responses to any such factors d. The standard does not require documentation of the identified fraud risk factors and the auditor responses to them

12. The following statements relate to communication of misstatement resulting from fraud to management and to these charged with governance. Which is false a. The auditor need not bring to the attention of those charged with governance any material weaknesses in internal control related to the prevention and detection of fraud b. If the auditor has identified a fraud, whether or not it results in a material misstatement in the financial statement, the auditor should communicate these matter to the appropriate level of management on a timely basis and consider the need to report such matter to those charged with governance c. If the auditor has obtained evidence that indicate that fraud may exits (even if the potential effect on the financial statement would not be material) the auditor should communicate these matters to the appropriate level of management on a timely basis and consider the need to report such matters to those charged with governance d. The auditor communication with those charged with governance maybe orally or in writing

13. According to PSA 250, the term noncompliance as used in the standard refers to acts of omission or commission by the entity being audited, either intentional or unintentional which are contrary to the prevailing laws and regulations. Such do not include a. Transaction entered into by the entity b. Transactions entered into the name of the entity c. Transactions entered into on the entitys behalf by its management or employees d. Personal misconduct by the entitys management or employee

14. In order to plan the audit, the auditor should obtain a general understanding of the legal and regulatory framework applicable to the entity and the industry and how the entity is complying with that framework. To obtain this understanding, the following procedures would ordinarily be considered by the auditor except a. Use the existing understanding of the entity industry, regulatory and other external factors b. Inquire of management concerning the entity policies and procedures regarding compliance with laws and regulations c. Inquire of management as to the laws and regulations that may be expected to have a fundamental effect on the operation of the entity d. Inspect correspondence with relevant licensing or regulatory authority

15. Which of the following statements is incorrect concerning reporting of noncompliance a. The auditor, as soon as practicable, either communicate with those charged with governance or obtain evidence that they are appropriately informed, regarding noncompliance that comes to the auditor attention b. If the auditor suspect that members of senior management including members of board of directors are involved in non-compliance, the auditor should report the matter to the next higher level of authority, if it exists such as an audit committee or a supervisory board c. The auditor should, as soon as practicable communicate with those charged with governance regarding noncompliance including matters that are clearly inconsequential; or trivial d. If in the auditor judgment, the noncompliance is believed to be intentional and material, the auditor should communicate the finding without delay

16. If the auditor concludes that the noncompliance has a material effect on the financial statements and has not been properly reflected in the financial statement, the auditor should express a. A qualified or an adverse opinion b. Qualified or disclaimer opinion c. Disclaimer of opinion d. Qualified opinion

17. If the auditor is precluded by the entity from obtaining sufficient appropriate audit evidence to evaluate whether non-compliance that maybe material to the financial statement has or is likely have, occurred, the auditor should express a. Qualified or adverse opinion b. Qualified or disclaimer opinion c. Adverse opinion d. Adverse or disclaimer of opinion

18. Under which of the circumstances below would the auditor conclude that withdrawal from the engagement is necessary a. The auditor concludes that the non-compliance has a material effect on the financial statements and has not been properly reflected in the financial statement b. The auditor is precluded by the entity from obtaining sufficient appropriate audit evidence to evaluate whether non-compliance that maybe material to the financial statements has or is likely to have c. The auditor is unable to determine whether noncompliance has occurred because of limitations imposed by the circumstances rather than by the entity d. The entity does not take the remedial action that the auditor considers necessary in the circumstances