Question 1 and 2

Your audit client is an investment bank called QQQ in China. The bank made a number of loans to Greek banks in 2010, and these are still outstanding. The creditworthiness of Greek banks was recently downgraded to "junk" status.

1.Using the above information, the risk you, as auditor, would be most concerned about:

A. There is a risk that loans/accounts receivable will be overstated due to the difficulties experienced by Greek banks repaying their debts.

B. None of above

C. There is a risk that loans/accounts payable will be understated due to the change in credit appraisal.

D. There is a risk that if the Greek banks do not survive, loans/ accounts receivable will be understated as QQQ will be required to increase debt provisions.

2.Using the above information, the assertion you, as auditor, would be most concerned about is:

A. Accuracy Valuation and allocation

B. Existence

C. Completeness

D. Rights and obligations

--------------------------------------------

3.Which of the following represents a high risk condition for the fraud risk factor opportunity?

A.Known or expected future layoffs

B.Management remunerate staff at award rates.

C.The company is making record profits.

D.Complex restructuring being undertaken

4.Which of the following conditions or events would most likely cause an auditor to have significant doubt about an entity's ability to continue as a going concern.

A.Significant related party transactions are pervasive

B.Cash flows from operating activities are negative.

C.Research and development projects are postponed

D.Annual cash dividends have not increased from the previous year.