All of the following statements are true, except:

A tendency for fraud may exist when the granting of stock options is dependent on reaching an earnings goal.

Ineffective internal controls result in higher risk of material misstatement in the financial statements than effective internal controls.

A company's history of exactly meeting analyst estimates is a factor which could lead auditors to assess inherent risk at a higher level.

The intentional loading of sales at the end of a period to customers that do not need the goods at that time should not be recorded as revenues.

A consistent pattern of earnings growth would eliminate the auditor's concern for fraud in revenue recognition.

Question 2 of 45

The most common criteria against which the auditor measures the fairness of financial statement presentation for a U.S.-based company is:

Government accounting principles

Generally accepted accounting principles

Generally accepted accounting standards

Sarbanes-Oxley compliance

Auditing standards

Question 3 of 45

Of the following types of audit evidence, _______________ is the least reliable.

Original documents.

Evidence from independent outside sources.

Evidence derived from a well-controlled system.

Evidence that the auditor observed directly.

Evidence from the client's organization.

Question 4 of 45

Which of the following employment positions could an auditor's spouse hold in a client without violating the independence requirements?

Internal audit director.

Order entry staff.

Controller.

Accounting department staff.

Treasurer.