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Chapter 05
Fraud in Financial Statements and Auditor Responsibilities
Multiple Choice Questions
1. Deliberately underbidding for an audit engagement to obtain a client and secure more
lucrative management advisory or consulting services is known as?
A. Opinion shopping
B. High-balling
C. Low-balling
D. Client shopping
2. One of the rules of professional conduct and repeated in GAAS, due care, requires a member
to discharge professional responsibilities with _____________.
A. Confidentiality and integrity
B. Objectivity and ethics
C. Standard morals and ethics
D. Competence and diligence
5-1
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
3. Susie is an auditor with XYZ Audit firm. The Senior Audit member has told her that all
fieldwork must be completed by the end of the week. Susie knows that corners have been cut
and certain tests not completed due to the time constraints. The integrity of the firm could be
compromised. What should Susie do?
A. Do nothing.
B. Talk with the chain of command of the client to see that her concerns are dealt with.
C. Follow the chain of command of XYZ to see that her concerns are dealt with.
D. Talk with a reporter from the Wall Street Journal.
4. The expectations gap refers to:
A. The space that exists between a train coming into the station and the platform used to
board the train
B. The difference between what the public expects an audit to uncover and what the
profession believes is the purpose of an audit
C. The difference between projected earnings based on analysts' expectations and actually
earnings
D. The difference between what the audit sets out to discover and what it actually does
discover
5. Which of the following is an element of the introductory paragraph of an auditor's report?
A. Identifies the type of opinion the auditor is giving
B. Identifies the entity, financial statements being audited and time period
C. Identifies audit testing and procedures used
D. Identifies the generally accepted auditing standards followed in conducting the audit
5-2
6. Which of the following is not an element of the auditor's responsibility of the auditor's report?
A. States the auditor's responsibility to express an opinion on the financial statements
B. States the audit provides reasonable assurance that the statements are free of material
misstatement
C. States audit provides reasonable basis for the opinion
D. States the audit evaluates the overall financial statement presentation
7. Typically, when a going concern issue exists the auditor should:
A. Issue an unmodified opinion with an emphasis-of-matter paragraph
B. Explain the reasons for the going concern issue
C. Indicate where management's plans to deal with the going concern are addressed
D. All of these
8. Which of the following is the most likely reason for an auditor to issue a modified opinion with
a qualification?
A. Inability to gather any sufficient relevant information to form the basis for the opinion
B. Misstatements that are material and pervasive
C. Going concern issue
D. Misstatements that are material but not pervasive
5-3
9. Adverse opinions are preceded by a separate paragraph that should meet all of the following
except for:
A. Substantive alternative treatments of GAAP
B. Substantive reasons for the adverse opinion
C. Principal effect of the adverse treatment on financial position and results of operations and
cash flows
D. Entitled "Basis for Adverse Opinion"
10. Under which of the following set of circumstances might the auditors disclaim an opinion?
A. The financial statements contain a departure from generally accepted accounting

principles, the effect of which is material
B. The auditor is unable to obtain sufficient appropriate audit evidence on which to base the
opinion
C. There has been a material change between periods in the method of the application of
accounting principles
D. Differences with management that lead to trust issues on the part of the auditor
11. When would it be appropriate for an auditor to withdraw from an engagement?
A. In order to avoid issuing an adverse opinion.
B. When that auditor cannot observe the taking of inventory or is unable to confirm
receivables.
C. When the auditor concludes that management cannot be trusted.
D. When the auditor has overbooked too much work.
5-4
12. Which of the following is true about PCAOB audit standards?
A. The required standards apply to all companies
B. The required standards apply to all public companies only
C. The required standards apply to all privately held companies only
D. The required standards apply to all not-for-profit entities
13. Which of the following summarizes the essence of general standards of GAAS?
A. Quality of professionals that perform an audit
B. Criteria used to judge whether the audit has met quality requirements
C. The standards that guide auditors in issuing the audit report
D. Whether the auditor obtained sufficient competent evidential matter to render an opinion
14. Which of the following summarizes the essence of field work standards of GAAS?
B. Criteria for judging the quality of audit work
C. Whether the auditor was independent in conducting the audit
D. Whether the auditor reviewed the client's financial statements for adherence to GAAP
15. Which of the following is not one of the reporting standards of GAAS that guides auditors in
formulating the audit opinion?
A. The financial statements have followed GAAP.
B. Consistency in the application of GAAP.
C. Adequate disclosures exist in the statements.
D. Gathering sufficient audit evidence to warrant an opinion.
5-5
16. Some critics claim the usefulness of the audit report is limited because:
A. Auditors do not examine all of the transactions
B. Language in the audit report relies on subjective evaluations such as what is meant by
"reasonable"
C. Transactions examined are based on materiality and risk assessment determinations
D. All of these may create doubts about usefulness
17. Which of the following is not correct about materiality?
A. The concept of materiality recognizes that some matters are more important for fair
presentation of financial statements
B. Materiality judgments are made in light of surrounding circumstances and necessarily

involve quantitative and qualitative judgments
C. Materiality should be predictable from audit to audit so that the readers of financial
statements know what constitutes materiality
D. An auditor's consideration of materiality is influenced by the auditor's perception of the

need of the readers of the financial statements
18. The auditors' determination of whether the financial statements "present fairly" is based on:
A. Whether the users are able to assess the reliability of the financial statements
B. Whether the statements have been prepared in accordance with the same GAAP used from
one year to another
C. Whether the auditor has been able to gather sufficient evidence to warrant the statement
that the financial statements present fairly
D. Whether the accounting principles used are appropriate in the circumstances
5-6
19. Which of the following is not a component of internal control?
A. Control environment
B. Information and communication systems
C. Monitoring of controls
D. Independence of the audit committee
20. The auditor's responsibility with regard to illegal acts is greatest when:
A. The illegal acts have an indirect and material effect on financial statement amounts
B. The illegal acts have a direct and material effect on financial statement amounts
C. The illegal acts have a direct and immaterial effect on financial statement amounts
D. Illegal acts exist regardless of the effects on the financial statements
21. The first step for an auditor who concludes an illegal act exists is to:
A. Bring the matter to the attention of the audit committee
B. Bring the matter to the attention of the SEC
C. Assess the impact of the illegal act on the financial statements
D. Assess the impact of the illegal act on the auditor's opinion
22. An auditor concludes that a client has committed an illegal act that has not been properly
accounted for or disclosed. The auditor should withdraw from the engagement if the
A. Auditor is precluded from obtaining sufficient competent evidence about the illegal act
B. Illegal act has an effect on the financial statements that is both material and direct
C. Auditor cannot reasonably estimate the effect of the illegal act on the financial statements
D. Client refuses to take the remedial steps deemed necessary by the auditors
5-7
23. The Private Securities Litigation Reform Act imposes additional requirements on public
companies reporting to the SEC and their auditors when:
A. The illegal act has a material effect on the financial statements
B. Senior management and the board have not acted properly to correct for the act
C. The failure to correct for the action is reasonably expected to warrant a departure from the
standard audit report
D. All of these are additional requirements
24. Auditors are responsible to detect and correct errors when they are:
A. Material
B. Material or immaterial
C. Due to an illegal act
D. Management fails to correct for the error
25. The auditors' responsibility to communicate findings with respect to fraud can best be
summarized as:
A. Communicate to the audit committee the existence of fraud but not the amount involved
B. Communicate to the audit committee both material and immaterial amounts of fraud that
are detected
C. Communicate to the SEC the existence of fraud but not the amount involved
D. Communicate to the SEC both material and immaterial amounts of fraud that are detected
5-8
26. The purpose of the fraud triangle is to identify:
A. The causes of when the audit opinion should be qualified.
B. To identify the causes of and reasons for fraud when there may be intentional
misstatements or omissions of amounts or disclosures in the financial statements.
C. To identify the causes of when there is a lack of independence in performing an audit.
D. All of these.
27. Which of the following is not part of the fraud triangle?
A. Incentives
B. Opportunity
C. Materiality
D. Rationalization
28. The difference between an error in the financial statements as compared to fraud is:
A. An error is always an intentional act designed to deceive another party
B. Fraud is always an intentional act designed to deceive another party
C. An error always leads to a qualification of the auditors' opinion
D. Fraudulent financial reporting is always material in amount
29. Each of the following represents a pressure that might lead to fraud except for:
A. Desire to maximize the value of stock options
B. Budget pressures
C. Meet financial analysts' earnings expectations
D. Ability to carry out the fraud
5-9
30. All of the following are in a position to commit fraud except for:
A. Employees who have access to assets
B. Top management who can override internal controls
C. External auditors who audit the financial statements
D. All of these are in a position to commit fraud
31. All of the following tend to be rationalizations for fraud except for:
A. We need to protect the shareholders and keep the stock price high
B. All companies use aggressive accounting techniques
C. The employee will be fired unless s/he goes along with the fraud
D. We are correcting a temporary problem that will not exist in the future
32. The misappropriation of assets refers to:
A. The deliberate use of company assets for personal reasons
B. The deliberate overstatement of financial statements
C. The deliberate omission of disclosures from the statements
D. All of these
5-10
33. Backdating options refers to:
A. Crossing out the date of exercise on the option certificate and changing it to an earlier date
when the stock price was lower
B. Changing the grant date of the options to lower the exercise price and reduce reported
earnings
C. Granting options to employees working for the company in years prior to the granting of the
options
D. Changing the future exercise price to correspond market increases in the stock price
34. The fraud at Tyco included each of the following acts except for:
A. Benefits given to certain members of the board of directors to secure their silence about
the fraud
B. Corporate assets used by members of top management for personal purposes
C. Setting up special-purpose-entities to keep debt off Tyco's books
D. Related party transactions that were not adequately disclosed
35. Members of the audit committee are responsible for each of the following except for:
A. Considering risks identified by the external auditor
B. Assessing whether management has set the appropriate ethical tone for the organization
C. Discussing with the external auditors financial reporting matters of concern
D. Rendering an audit opinion after examining the entity's financial statements and internal
controls
5-11
36. What is the motive behind the PCAOB Integrated Audit Concept?
A. Elevation of importance of internal controls
B. Improvement of the quality and integrity of both internal controls over financial reporting
and independent financial statement audits
C. Improvement of the speed and reliability of both corporate financial reporting and
independent financial statement audits
D. Elevation of importance of independent financial statement audits
37. In an audit, the auditor has a requirement to address risk assessment with respect to:
A. The design and performance of audit procedures to respond to assessed risks
B. Whether the standards close the expectation gap
C. The role and responsibilities of the audit committee in preventing fraud
D. All of these
38. In performing risk assessment the auditor should identify the following types of
misstatements:
A. Known and unknown misstatements
B. Likely and unknown misstatements
C. Known and likely misstatements
D. All material misstatements
5-12
39. The Committee of Sponsoring Organizations of the Treadway Committee (COSO) analyzed the
financial reporting of public companies during the 1998-2007 periods when business failures
due to accounting fraud were high and found that:
A. Top management was frequently involved in the fraud with the CEO and/or CFO being the
most frequently involved
B. The most common fraud technique involved understating expenses
C. The audit committee always sanctioned the fraud
D. A minority of audit reports issued during the fraud period contained unqualified audit
opinions
40. PCAOB Auditing Standard No.4 requires that the external auditors should take each of the
following steps when reporting on whether a material weakness still exists in the internal
controls except for:
A. Evaluate whether management has accepted responsibility for the effectiveness of internal
control
B. Evaluate whether management asserts whether the controls are effective in correcting the
material weakness
C. Evaluate whether management has obtained sufficient evidence to support its assessment
D. Evaluate whether management has conducted an audit of internal controls
41. A study conducted of financial statement restatements during the period of 2007 through 2009
indicated a decline in the number of restatements that were attributed to each of the
following except for:
A. Improved audits of financial statements
B. Improved reliability of internal controls
C. A more relaxed approach of the SEC regarding materiality and the need to file restatements
D. Companies making and reporting fewer mistakes or catching fewer mistakes
5-13
42. An ethical dilemma for professional accountants is when a conflict exists between each of the
A. The auditor and client
B. Different accounting members of management
C. The CEO and board of directors
D. All of these
43. If a company is seeking out views of different accounting firms until they find one with a
desired accounting treatment, it would be called _____.
A. Low-balling
B. Under bidding
C. Opinion shopping
D. Option pricing
44. Which is not part of the required links of the chain of command that the controller should
follow to inform of a material misstatement in the financial statements?
A. Audit Committee of Board of Directors
B. CEO
C. External auditor
D. CFO
5-14
45. Which of the following is an example of opinion shopping by a company?
A. Changing auditors due to the quality of work by the auditors
B. Changing auditors due to wanting a different accounting treatment than required by the
external auditor
C. Changing auditors due to the size of the audit fees
D. Changing auditors due to conflicts over the nature and scope of the audit
46. In which of the following circumstances would a qualified opinion be appropriate?
A. The statements are not in conformity with generally accepted accounting principles
regarding stock options plans and but does not have pervasive effect on the financial
statements.
B. The statements are not in conformity with generally accepted accounting principles
regarding stock options plans and has pervasive effect on the financial statements.
C. The auditor has been unable to obtain sufficient competent evidential matter.
D. The principal auditors decide to withdraw from the engagement due to distrust of
management.
47. Which of the following is not true of "reasonable assurance"?
A. The auditors have exercised due care
B. The audit opinion is a guarantee that material misstatements have been identified
C. The audit has been properly planned and supervised
D. The auditors have followed GAAS
5-15
48. Which of the following is not a consideration in determining a measure of materiality?
A. Risks of material misstatements due to fraud
B. Quantitative assessment of the importance of the difference of opinion with client

management on an accounting issues
C. Qualitative assessment of the importance of the difference of opinion with client

D. Importance of audit committee in the organization
49. Which of the following is not an essential area of fraud considerations assessed by the
auditors?
A. Assessing the possibility of fraud
B. Whether management deliberatively committed fraud
C. Identifying risks of fraud
D. Evaluating the characteristics of fraud
50. PCAOB Auditing Standard No.16 require the auditor to communicate with the audit committee
all but?
A. Significant accounting policies and practices
B. Critical accounting practices and policies
C. Significant unusual transactions
D. The procedures followed by the auditor in evaluating evidence
5-16
51. Because of the risk of material misstatement, an audit of financial statements in accordance
with GAAS should be planned and performed with
A. Objective judgment
B. Professional skepticism
C. Internal controls
D. Due care
52. The framework of COSO Enterprise Risk Management is to
A. Incorporate enhanced internal control principles into enhanced corporate governance
B. Incorporate enhanced audit sampling procedures in the testing of internal controls
C. Incorporate enhanced corporate governance into internal control principles
D. Incorporate enhanced audit sampling procedures in substantive testing
53. Which of the following is not an element of COSO Enterprise Risk Management?
A. Enhancing risk response decisions
B. Reducing operating surprises and losses
C. Seizing opportunities
D. Improving deployment of information technology
5-17
54. Management's attitude toward aggressive financial statement reporting and its emphasis on
meeting projected profit numbers would significantly influence an entity's control environment
when
A. Internal auditors report to the audit committee
B. The audit committee is active in overseeing the entity's financial reporting
C. Management is dominated by one shareholder with little other governance
D. Management does not have a stock option plan
55. Larry is the controller of ABC Industries and has a difference of opinion on an accounting
matter with the CFO. Larry is told that the very survival of the company depends on his going
along with the proposed accounting treatment that has been approved by the CEO and
increases earnings 20 percent above what Larry believes it should be. If Larry goes along with
the CFO, he is reasoning at what stage in Kohlberg's model:
A. Stage 1
B. Stage 2
C. Stage 3
D. Stage 4
56. XYZ Company requires that its internal auditor must bring all accounting and financial
reporting matters of concern to the CFO and CEO before going to the audit committee. The
weakness in internal controls is most likely to lead to which element of the fraud triangle
when instances of fraud occur
A. Pressure
B. Opportunity
C. Rationalization
D. Professional skepticism
5-18
57. In the Computer Associates case, each of the following allegations were made against the
company except for the following:
A. Backdating software contracts into the prior month
B. Executing contracts with preprinted dates from prior quarter
C. Misusing company resources by members of top management
D. Extending quarters by at least 3 business days
58. In the ZZZZ best case, Barry Minkow was sentenced to 5 years for his involvement in
A. A fraudulent insurance restoration scam
B. Insider trading on Lennar stock
C. Stealing from a San Diego church
D. Overcharging a LA housewife for carpet cleaning services
59. In the Imperial Valley Thrift & Loan case, each of the following were reasons for the going
concern issue except for:
A. The magnitude of loan losses
B. Insufficient equity capital
C. Operating losses over an extended period of time
D. Questions about the collectability of outstanding loans
60. The primary issue discussed in the Krispy Kreme case was:
A. Use of special-purpose-entities to keep debt off the books
B. Use of "round trip" transactions to accelerate the recording of earnings
C. Internal controls over operating activities
D. Internal controls over the making of doughnuts
5-19
61. The Audit Client Consideration case deals with issues related to:
A. Acceptance of new clients
B. Issues that arise between the predecessor audit firm and the client
C. Going concern issues raised by previous auditors
D. All of these
62. The Dunco Industries case deals with issues related to:
A. The timing of revenue recognition and shipping date of merchandise
B. The timing of revenue recognition and delivery date of merchandise
C. The timing of expense recognition on accrual accounts
D. Manual entries after the quarter's close that lacked sufficient supporting documentation
63. The First Community Bank case contained each of the following deficiencies except for:
A. The loan loss reserves of the bank were understated
B. The level of impairment of existing bank loans was material
C. The collateral for loans was insufficient
D. All of these
64. The Groupon case deals with all but the following issues?
A. Improperly estimated customer returns
B. Improper recognition of gross revenue
C. Used a new innovative metric of "Adjusted Consolidated Segment Operating Income"
D. Blamed material weakness on their auditors EY
5-20
65. Fannie Mae's financial statements were investigated because of allegations that the
company:
A. Deferred derivative losses on the balance sheet thereby inflating profits
B. Used derivatives to hid subprime loans
C. Sold derivatives to increase cash flows prior to bank financing
D. All of these
66. The primary accounting issue in the Royal Ahold case is:
A. Fraudulent recording of revenues on sales to customers
B. Fraudulent use of company resources by top management for personal purposes
C. Fraudulent inflation of promotional allowances to increase operating income
D. Fraudulent inflation of inventory to reduce losses on the income statement
Essay Questions
5-21
67. Explain each of the three sides of the fraud triangle with respect to how it contributes toward
the possibility that fraud in the financial statements may be present. Are there differences
with respect to how each element might influence occupational fraud and fraudulent financial
statements? Explain.
68. The Committee of Sponsoring Organizations of the Treadway Committee (COSO) analyzed the
financial reporting of public companies during the 1998-2007 periods when business failures
due to accounting fraud were high. Describe the major findings of COSO with respect to
financial statement fraud.
5-22
69. Explain the circumstances under which an auditor should give each of the following opinions:
(a) Unmodified opinion

(b) Unmodified opinion with an emphasis-of-matter paragraph
(c) Qualified opinion
(d) Adverse opinion
70. Why is materiality one of the most difficult judgments to make in auditing financial
statements?
5-23
71. Differentiate between the auditors' responsibilities to detect errors, fraud, and illegal acts.
How would you assess the ethics of a company that has experienced each event with respect
to motivation and the integrity of those who go along with such events?
72. In the Tyco fraud the corporate governance system completely broke down. Explain the
failings in the corporate governance system at Tyco and how the Sarbanes-Oxley Act
addresses those failings.
5-24
73. Professional skepticism is considered to be a critical element of conducting an audit. Describe
the elements of professional skepticism and how it relates to carrying out an audit in
accordance with GAAS.
74. What are the audit committee's responsibilities with respect to fraud and risk assessment?
How do such responsibilities relate to the communication that should take place between the
external auditor and audit committee?
5-25
75. Kohlberg's model addresses the stages of moral development a person might move through in
developing a strong sense of ethics. Analyze each of those stages with respect to the three
elements of the fraud triangle. How can an individual resist the temptation to become involve
in fraud by possessing the characteristics of behavior included in each stage?
76. Describe the steps that auditors should take under Auditing Standard No. 4 of the PCAOB to
report on whether a previously reported material weakness still exists.
5-26
77. Campus Fast is a new audit client. Client Fast uses public WiFi to place and deliver restaurant
take out for students at the Up and Coming State University. Campus Fast was founded by
three highly ambitious MBA students at the university. The business plan is to find a buyer or
place an IPO of the company by graduation in two years. The founders expect to pay off all
student loans, take a tour around the world and then start another company. In order for the
business plan to work on the timeline for graduation, the business must meet highly ambitious
earnings numbers. Additionally, the company is dealing with two situations that the founders
would like to keep from the auditors:
1) The company has been using free, unsecured public WiFi to take orders via the Internet.
The customer may pay via the Internet. Several students, who all happen to be members of
the same student organization on campus, are claiming that using Campus Fast has allowed
their identity to be stolen. One student is claiming that she had $12,000 of charges on her
credit card to the unsecured Internet site of Campus Fast. Management plans to pay off the
complaining students and keep the true liability off the balance sheet. The reason is Campus
Fast is concerned that an interested buyer may become concerned about the unsecured site
and might get scared by the student complaints.
2) The company guarantees fast delivery. It has offered to pay any speeding or other moving
violation tickets to its delivery drivers. Unfortunately one of the drivers was involved in an
accident due to running a red light. The passenger in the other car is in critical condition and
the intensive care unit in the hospital. The driver has promised the family of the passenger
that the company will make good on any expenses and admitted the company policy on
repaying all traffic tickets. Attorneys for the injured party are threatening to sue and publicize
the situation. The founders do not have enough cash to take care of this problem but are still
trying to keep the situation from the auditors and potential buyer.
Using the internal control framework from SAS 55, 98, COSO and Enterprise Risk
Management, assess the internal controls at Campus Fast and risk environment.
5-27
78. Internal controls, an internal audit function, and an audit committee are all elements of a
strong corporate governance system. How should an external auditor evaluate these elements
in making a risk assessment? What are the ethical signs that each system is operating as
intended?
5-28
Chapter 05 Fraud in Financial Statements and Auditor
Responsibilities Answer Key
Multiple Choice Questions
1. Deliberately underbidding for an audit engagement to obtain a client and secure more
lucrative management advisory or consulting services is known as?
A. Opinion shopping
B. High-balling
C. Low-balling
D. Client shopping
2. One of the rules of professional conduct and repeated in GAAS, due care, requires a
member to discharge professional responsibilities with _____________.
A. Confidentiality and integrity
B. Objectivity and ethics
C. Standard morals and ethics
D. Competence and diligence
5-29
3. Susie is an auditor with XYZ Audit firm. The Senior Audit member has told her that all
fieldwork must be completed by the end of the week. Susie knows that corners have been
cut and certain tests not completed due to the time constraints. The integrity of the firm
could be compromised. What should Susie do?
A. Do nothing.
B. Talk with the chain of command of the client to see that her concerns are dealt with.
C. Follow the chain of command of XYZ to see that her concerns are dealt with.
D. Talk with a reporter from the Wall Street Journal.
4. The expectations gap refers to:
A. The space that exists between a train coming into the station and the platform used to
board the train
B. The difference between what the public expects an audit to uncover and what the
profession believes is the purpose of an audit
C. The difference between projected earnings based on analysts' expectations and

actually earnings
D. The difference between what the audit sets out to discover and what it actually does
discover
5. Which of the following is an element of the introductory paragraph of an auditor's report?
A. Identifies the type of opinion the auditor is giving
B. Identifies the entity, financial statements being audited and time period
C. Identifies audit testing and procedures used
D. Identifies the generally accepted auditing standards followed in conducting the audit
5-30
6. Which of the following is not an element of the auditor's responsibility of the auditor's
report?
A. States the auditor's responsibility to express an opinion on the financial statements
B. States the audit provides reasonable assurance that the statements are free of material
misstatement
C. States audit provides reasonable basis for the opinion
D. States the audit evaluates the overall financial statement presentation
7. Typically, when a going concern issue exists the auditor should:
A. Issue an unmodified opinion with an emphasis-of-matter paragraph
B. Explain the reasons for the going concern issue
C. Indicate where management's plans to deal with the going concern are addressed
D. All of these
8. Which of the following is the most likely reason for an auditor to issue a modified opinion
with a qualification?
A. Inability to gather any sufficient relevant information to form the basis for the opinion
B. Misstatements that are material and pervasive
C. Going concern issue
D. Misstatements that are material but not pervasive
5-31
9. Adverse opinions are preceded by a separate paragraph that should meet all of the
A. Substantive alternative treatments of GAAP
B. Substantive reasons for the adverse opinion
C. Principal effect of the adverse treatment on financial position and results of operations
and cash flows
D. Entitled "Basis for Adverse Opinion"
10. Under which of the following set of circumstances might the auditors disclaim an opinion?
A. The financial statements contain a departure from generally accepted accounting

principles, the effect of which is material
B. The auditor is unable to obtain sufficient appropriate audit evidence on which to base
the opinion
C. There has been a material change between periods in the method of the application of
accounting principles
D. Differences with management that lead to trust issues on the part of the auditor
11. When would it be appropriate for an auditor to withdraw from an engagement?
A. In order to avoid issuing an adverse opinion.
B. When that auditor cannot observe the taking of inventory or is unable to confirm
receivables.
C. When the auditor concludes that management cannot be trusted.
D. When the auditor has overbooked too much work.
5-32
12. Which of the following is true about PCAOB audit standards?
A. The required standards apply to all companies
B. The required standards apply to all public companies only
C. The required standards apply to all privately held companies only
D. The required standards apply to all not-for-profit entities
13. Which of the following summarizes the essence of general standards of GAAS?
B. Criteria used to judge whether the audit has met quality requirements
C. The standards that guide auditors in issuing the audit report
D. Whether the auditor obtained sufficient competent evidential matter to render an

opinion
14. Which of the following summarizes the essence of field work standards of GAAS?
B. Criteria for judging the quality of audit work
C. Whether the auditor was independent in conducting the audit
D. Whether the auditor reviewed the client's financial statements for adherence to GAAP
15. Which of the following is not one of the reporting standards of GAAS that guides auditors in
formulating the audit opinion?
A. The financial statements have followed GAAP.
B. Consistency in the application of GAAP.
C. Adequate disclosures exist in the statements.
D. Gathering sufficient audit evidence to warrant an opinion.
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16. Some critics claim the usefulness of the audit report is limited because:
A. Auditors do not examine all of the transactions
B. Language in the audit report relies on subjective evaluations such as what is meant by
"reasonable"
C. Transactions examined are based on materiality and risk assessment determinations
D. All of these may create doubts about usefulness
17. Which of the following is not correct about materiality?
A. The concept of materiality recognizes that some matters are more important for fair
presentation of financial statements
B. Materiality judgments are made in light of surrounding circumstances and necessarily

involve quantitative and qualitative judgments
C. Materiality should be predictable from audit to audit so that the readers of financial
statements know what constitutes materiality
D. An auditor's consideration of materiality is influenced by the auditor's perception of the

need of the readers of the financial statements
18. The auditors' determination of whether the financial statements "present fairly" is based
on:
A. Whether the users are able to assess the reliability of the financial statements
B. Whether the statements have been prepared in accordance with the same GAAP used
from one year to another
C. Whether the auditor has been able to gather sufficient evidence to warrant the
statement that the financial statements present fairly
D. Whether the accounting principles used are appropriate in the circumstances
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19. Which of the following is not a component of internal control?
A. Control environment
B. Information and communication systems
C. Monitoring of controls
D. Independence of the audit committee
20. The auditor's responsibility with regard to illegal acts is greatest when:
A. The illegal acts have an indirect and material effect on financial statement amounts
B. The illegal acts have a direct and material effect on financial statement amounts
C. The illegal acts have a direct and immaterial effect on financial statement amounts
D. Illegal acts exist regardless of the effects on the financial statements
21. The first step for an auditor who concludes an illegal act exists is to:
A. Bring the matter to the attention of the audit committee
B. Bring the matter to the attention of the SEC
C. Assess the impact of the illegal act on the financial statements
D. Assess the impact of the illegal act on the auditor's opinion
22. An auditor concludes that a client has committed an illegal act that has not been properly
accounted for or disclosed. The auditor should withdraw from the engagement if the
A. Auditor is precluded from obtaining sufficient competent evidence about the illegal act
B. Illegal act has an effect on the financial statements that is both material and direct
C. Auditor cannot reasonably estimate the effect of the illegal act on the financial
statements
D. Client refuses to take the remedial steps deemed necessary by the auditors
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23. The Private Securities Litigation Reform Act imposes additional requirements on public
companies reporting to the SEC and their auditors when:
A. The illegal act has a material effect on the financial statements
B. Senior management and the board have not acted properly to correct for the act
C. The failure to correct for the action is reasonably expected to warrant a departure from
the standard audit report
D. All of these are additional requirements
24. Auditors are responsible to detect and correct errors when they are:
A. Material
B. Material or immaterial
C. Due to an illegal act
D. Management fails to correct for the error
25. The auditors' responsibility to communicate findings with respect to fraud can best be
summarized as:
A. Communicate to the audit committee the existence of fraud but not the amount
involved
B. Communicate to the audit committee both material and immaterial amounts of fraud
that are detected
C. Communicate to the SEC the existence of fraud but not the amount involved
D. Communicate to the SEC both material and immaterial amounts of fraud that are
detected
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26. The purpose of the fraud triangle is to identify:
A. The causes of when the audit opinion should be qualified.
B. To identify the causes of and reasons for fraud when there may be intentional
misstatements or omissions of amounts or disclosures in the financial statements.
C. To identify the causes of when there is a lack of independence in performing an audit.
D. All of these.
27. Which of the following is not part of the fraud triangle?
A. Incentives
B. Opportunity
C. Materiality
D. Rationalization
28. The difference between an error in the financial statements as compared to fraud is:
A. An error is always an intentional act designed to deceive another party
B. Fraud is always an intentional act designed to deceive another party
C. An error always leads to a qualification of the auditors' opinion
D. Fraudulent financial reporting is always material in amount
29. Each of the following represents a pressure that might lead to fraud except for:
A. Desire to maximize the value of stock options
B. Budget pressures
C. Meet financial analysts' earnings expectations
D. Ability to carry out the fraud
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30. All of the following are in a position to commit fraud except for:
A. Employees who have access to assets
B. Top management who can override internal controls
C. External auditors who audit the financial statements
D. All of these are in a position to commit fraud
31. All of the following tend to be rationalizations for fraud except for:
A. We need to protect the shareholders and keep the stock price high
B. All companies use aggressive accounting techniques
C. The employee will be fired unless s/he goes along with the fraud
D. We are correcting a temporary problem that will not exist in the future
32. The misappropriation of assets refers to:
A. The deliberate use of company assets for personal reasons
B. The deliberate overstatement of financial statements
C. The deliberate omission of disclosures from the statements
D. All of these
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33. Backdating options refers to:
A. Crossing out the date of exercise on the option certificate and changing it to an earlier
date when the stock price was lower
B. Changing the grant date of the options to lower the exercise price and reduce reported
earnings
C. Granting options to employees working for the company in years prior to the granting of
the options
D. Changing the future exercise price to correspond market increases in the stock price
34. The fraud at Tyco included each of the following acts except for:
A. Benefits given to certain members of the board of directors to secure their silence
about the fraud
B. Corporate assets used by members of top management for personal purposes
C. Setting up special-purpose-entities to keep debt off Tyco's books
D. Related party transactions that were not adequately disclosed
35. Members of the audit committee are responsible for each of the following except for:
A. Considering risks identified by the external auditor
B. Assessing whether management has set the appropriate ethical tone for the
organization
C. Discussing with the external auditors financial reporting matters of concern
D. Rendering an audit opinion after examining the entity's financial statements and
internal controls
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36. What is the motive behind the PCAOB Integrated Audit Concept?
A. Elevation of importance of internal controls
B. Improvement of the quality and integrity of both internal controls over financial
reporting and independent financial statement audits
C. Improvement of the speed and reliability of both corporate financial reporting and
independent financial statement audits
D. Elevation of importance of independent financial statement audits
37. In an audit, the auditor has a requirement to address risk assessment with respect to:
A. The design and performance of audit procedures to respond to assessed risks
B. Whether the standards close the expectation gap
C. The role and responsibilities of the audit committee in preventing fraud
D. All of these
38. In performing risk assessment the auditor should identify the following types of
misstatements:
A. Known and unknown misstatements
B. Likely and unknown misstatements
C. Known and likely misstatements
D. All material misstatements
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39. The Committee of Sponsoring Organizations of the Treadway Committee (COSO) analyzed
the financial reporting of public companies during the 1998-2007 periods when business
failures due to accounting fraud were high and found that:
A. Top management was frequently involved in the fraud with the CEO and/or CFO being
the most frequently involved
B. The most common fraud technique involved understating expenses
C. The audit committee always sanctioned the fraud
D. A minority of audit reports issued during the fraud period contained unqualified audit
opinions
40. PCAOB Auditing Standard No.4 requires that the external auditors should take each of the
following steps when reporting on whether a material weakness still exists in the internal
controls except for:
A. Evaluate whether management has accepted responsibility for the effectiveness of

internal control
B. Evaluate whether management asserts whether the controls are effective in correcting
the material weakness
C. Evaluate whether management has obtained sufficient evidence to support its

assessment
D. Evaluate whether management has conducted an audit of internal controls
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41. A study conducted of financial statement restatements during the period of 2007 through
2009 indicated a decline in the number of restatements that were attributed to each of the
A. Improved audits of financial statements
B. Improved reliability of internal controls
C. A more relaxed approach of the SEC regarding materiality and the need to file
restatements
D. Companies making and reporting fewer mistakes or catching fewer mistakes
42. An ethical dilemma for professional accountants is when a conflict exists between each of
the following except for:
A. The auditor and client
B. Different accounting members of management
C. The CEO and board of directors
D. All of these
43. If a company is seeking out views of different accounting firms until they find one with a
desired accounting treatment, it would be called _____.
A. Low-balling
B. Under bidding
C. Opinion shopping
D. Option pricing
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44. Which is not part of the required links of the chain of command that the controller should
follow to inform of a material misstatement in the financial statements?
A. Audit Committee of Board of Directors
B. CEO
C. External auditor
D. CFO
45. Which of the following is an example of opinion shopping by a company?
A. Changing auditors due to the quality of work by the auditors
B. Changing auditors due to wanting a different accounting treatment than required by the
external auditor
C. Changing auditors due to the size of the audit fees
D. Changing auditors due to conflicts over the nature and scope of the audit
46. In which of the following circumstances would a qualified opinion be appropriate?
A. The statements are not in conformity with generally accepted accounting principles
regarding stock options plans and but does not have pervasive effect on the financial
statements.
B. The statements are not in conformity with generally accepted accounting principles
regarding stock options plans and has pervasive effect on the financial statements.
C. The auditor has been unable to obtain sufficient competent evidential matter.
D. The principal auditors decide to withdraw from the engagement due to distrust of
management.
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47. Which of the following is not true of "reasonable assurance"?
A. The auditors have exercised due care
B. The audit opinion is a guarantee that material misstatements have been identified
C. The audit has been properly planned and supervised
D. The auditors have followed GAAS
48. Which of the following is not a consideration in determining a measure of materiality?
A. Risks of material misstatements due to fraud
B. Quantitative assessment of the importance of the difference of opinion with client

C. Qualitative assessment of the importance of the difference of opinion with client

D. Importance of audit committee in the organization
49. Which of the following is not an essential area of fraud considerations assessed by the
auditors?
A. Assessing the possibility of fraud
B. Whether management deliberatively committed fraud
C. Identifying risks of fraud
D. Evaluating the characteristics of fraud
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50. PCAOB Auditing Standard No.16 require the auditor to communicate with the audit
committee all but?
A. Significant accounting policies and practices
B. Critical accounting practices and policies
C. Significant unusual transactions
D. The procedures followed by the auditor in evaluating evidence
51. Because of the risk of material misstatement, an audit of financial statements in

accordance with GAAS should be planned and performed with
A. Objective judgment
B. Professional skepticism
C. Internal controls
D. Due care
52. The framework of COSO Enterprise Risk Management is to
A. Incorporate enhanced internal control principles into enhanced corporate governance
B. Incorporate enhanced audit sampling procedures in the testing of internal controls
C. Incorporate enhanced corporate governance into internal control principles
D. Incorporate enhanced audit sampling procedures in substantive testing
53. Which of the following is not an element of COSO Enterprise Risk Management?
A. Enhancing risk response decisions
B. Reducing operating surprises and losses
C. Seizing opportunities
D. Improving deployment of information technology
5-45
54. Management's attitude toward aggressive financial statement reporting and its emphasis
on meeting projected profit numbers would significantly influence an entity's control
environment when
A. Internal auditors report to the audit committee
B. The audit committee is active in overseeing the entity's financial reporting
C. Management is dominated by one shareholder with little other governance
D. Management does not have a stock option plan
55. Larry is the controller of ABC Industries and has a difference of opinion on an accounting
matter with the CFO. Larry is told that the very survival of the company depends on his
going along with the proposed accounting treatment that has been approved by the CEO
and increases earnings 20 percent above what Larry believes it should be. If Larry goes
along with the CFO, he is reasoning at what stage in Kohlberg's model:
A. Stage 1
B. Stage 2
C. Stage 3
D. Stage 4
56. XYZ Company requires that its internal auditor must bring all accounting and financial
reporting matters of concern to the CFO and CEO before going to the audit committee. The
weakness in internal controls is most likely to lead to which element of the fraud triangle
when instances of fraud occur
A. Pressure
B. Opportunity
C. Rationalization
D. Professional skepticism
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57. In the Computer Associates case, each of the following allegations were made against the
company except for the following:
A. Backdating software contracts into the prior month
B. Executing contracts with preprinted dates from prior quarter
C. Misusing company resources by members of top management
D. Extending quarters by at least 3 business days
58. In the ZZZZ best case, Barry Minkow was sentenced to 5 years for his involvement in
A. A fraudulent insurance restoration scam
B. Insider trading on Lennar stock
C. Stealing from a San Diego church
D. Overcharging a LA housewife for carpet cleaning services
59. In the Imperial Valley Thrift & Loan case, each of the following were reasons for the going
concern issue except for:
A. The magnitude of loan losses
B. Insufficient equity capital
C. Operating losses over an extended period of time
D. Questions about the collectability of outstanding loans
60. The primary issue discussed in the Krispy Kreme case was:
A. Use of special-purpose-entities to keep debt off the books
B. Use of "round trip" transactions to accelerate the recording of earnings
C. Internal controls over operating activities
D. Internal controls over the making of doughnuts
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61. The Audit Client Consideration case deals with issues related to:
A. Acceptance of new clients
B. Issues that arise between the predecessor audit firm and the client
C. Going concern issues raised by previous auditors
D. All of these
62. The Dunco Industries case deals with issues related to:
A. The timing of revenue recognition and shipping date of merchandise
B. The timing of revenue recognition and delivery date of merchandise
C. The timing of expense recognition on accrual accounts
D. Manual entries after the quarter's close that lacked sufficient supporting documentation
63. The First Community Bank case contained each of the following deficiencies except for:
A. The loan loss reserves of the bank were understated
B. The level of impairment of existing bank loans was material
C. The collateral for loans was insufficient
D. All of these
64. The Groupon case deals with all but the following issues?
A. Improperly estimated customer returns
B. Improper recognition of gross revenue
C. Used a new innovative metric of "Adjusted Consolidated Segment Operating Income"
D. Blamed material weakness on their auditors EY
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65. Fannie Mae's financial statements were investigated because of allegations that the
company:
A. Deferred derivative losses on the balance sheet thereby inflating profits
B. Used derivatives to hid subprime loans
C. Sold derivatives to increase cash flows prior to bank financing
D. All of these
66. The primary accounting issue in the Royal Ahold case is:
A. Fraudulent recording of revenues on sales to customers
B. Fraudulent use of company resources by top management for personal purposes
C. Fraudulent inflation of promotional allowances to increase operating income
D. Fraudulent inflation of inventory to reduce losses on the income statement
Essay Questions
67. Explain each of the three sides of the fraud triangle with respect to how it contributes
toward the possibility that fraud in the financial statements may be present. Are there
differences with respect to how each element might influence occupational fraud and
fraudulent financial statements? Explain.
Answers will vary
5-49
68. The Committee of Sponsoring Organizations of the Treadway Committee (COSO) analyzed
the financial reporting of public companies during the 1998-2007 periods when business
failures due to accounting fraud were high. Describe the major findings of COSO with
respect to financial statement fraud.
Answers will vary
69. Explain the circumstances under which an auditor should give each of the following
opinions:
(a) Unmodified opinion

(b) Unmodified opinion with an emphasis-of-matter paragraph
(c) Qualified opinion
(d) Adverse opinion
Answers will vary
70. Why is materiality one of the most difficult judgments to make in auditing financial
statements?
Answers will vary
5-50
71. Differentiate between the auditors' responsibilities to detect errors, fraud, and illegal acts.
How would you assess the ethics of a company that has experienced each event with
respect to motivation and the integrity of those who go along with such events?
Answers will vary
72. In the Tyco fraud the corporate governance system completely broke down. Explain the
failings in the corporate governance system at Tyco and how the Sarbanes-Oxley Act
addresses those failings.
Answers will vary
73. Professional skepticism is considered to be a critical element of conducting an audit.

Describe the elements of professional skepticism and how it relates to carrying out an
audit in accordance with GAAS.
Answers will vary
74. What are the audit committee's responsibilities with respect to fraud and risk assessment?
How do such responsibilities relate to the communication that should take place between
the external auditor and audit committee?
Answers will vary
5-51
75. Kohlberg's model addresses the stages of moral development a person might move through
in developing a strong sense of ethics. Analyze each of those stages with respect to the
three elements of the fraud triangle. How can an individual resist the temptation to become
involve in fraud by possessing the characteristics of behavior included in each stage?
Answers will vary
76. Describe the steps that auditors should take under Auditing Standard No. 4 of the PCAOB
to report on whether a previously reported material weakness still exists.
Answers will vary
5-52
77. Campus Fast is a new audit client. Client Fast uses public WiFi to place and deliver
restaurant take out for students at the Up and Coming State University. Campus Fast was
founded by three highly ambitious MBA students at the university. The business plan is to
find a buyer or place an IPO of the company by graduation in two years. The founders
expect to pay off all student loans, take a tour around the world and then start another
company. In order for the business plan to work on the timeline for graduation, the
business must meet highly ambitious earnings numbers. Additionally, the company is
dealing with two situations that the founders would like to keep from the auditors:
1) The company has been using free, unsecured public WiFi to take orders via the Internet.
The customer may pay via the Internet. Several students, who all happen to be members of
the same student organization on campus, are claiming that using Campus Fast has
allowed their identity to be stolen. One student is claiming that she had $12,000 of charges
on her credit card to the unsecured Internet site of Campus Fast. Management plans to pay
off the complaining students and keep the true liability off the balance sheet. The reason is
Campus Fast is concerned that an interested buyer may become concerned about the
unsecured site and might get scared by the student complaints.
2) The company guarantees fast delivery. It has offered to pay any speeding or other
moving violation tickets to its delivery drivers. Unfortunately one of the drivers was involved
in an accident due to running a red light. The passenger in the other car is in critical
condition and the intensive care unit in the hospital. The driver has promised the family of
the passenger that the company will make good on any expenses and admitted the
company policy on repaying all traffic tickets. Attorneys for the injured party are
threatening to sue and publicize the situation. The founders do not have enough cash to
take care of this problem but are still trying to keep the situation from the auditors and
potential buyer.
Using the internal control framework from SAS 55, 98, COSO and Enterprise Risk
Management, assess the internal controls at Campus Fast and risk environment.
The students should discuss the control environment of Campus fast (founders intent on
making goals) risk assessment (two potential contingent and actual liabilities that the
5-53
founders are trying to cover up and keep off the balance sheet), control activities,
information and communications systems (liability of using unsecured WiFi), and
monitoring. Corporate governance issues exist although we do not know whether oversight
mechanisms were in place to serve as a check on management behavior.
78. Internal controls, an internal audit function, and an audit committee are all elements of a
strong corporate governance system. How should an external auditor evaluate these
elements in making a risk assessment? What are the ethical signs that each system is
operating as intended?
The internal audit function should be an independent one with direct links between the
internal auditors and audit committee so that top management does not have the
opportunity to interfere in the reporting process. The ethical values of due care,
responsibility, and accountability support an independent internal audit committee
function. Internal controls should provide the foundation for proper accounting and
reporting by establishing a control environment that fosters an ethical culture through the
tone at the top set by management. Top management should promote honesty and
integrity in the financial reporting systems. The corporate governance system establishes
how matters of concern will be handled within the organization and with the external
auditors. There should be clear communication lines within the organization for the internal
auditors. The audit committee should be informed and actively involved in overseeing the
financial reporting process. Risk assessment depends on the strength of these systems
and whether they are operating as intended.
5-54
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Telamone (C.), battaglia (255 a. C.), 141.
Telesia (nel Sannio), distrutta, 333.
Temiscira, città del Ponto, 349; assediata da Lucullo, 349, 350.
Tempio della Fede, 242, 243.
Tempio di Giove (sul Campidoglio), 19.
Terentilio (C. Arsa), tribuno della plebe; sua legge circa il potere dei
consoli, 36; opposizione dei patrizi, 36.
Terenzio (C. Varrone) (cons. 216 a. C.), 158; battuto a Canne (2 agosto
216 a. C.), 159-60.
Termopili (Le), battaglia (191 a. C.), 190.
Terracina, assediata dai Sanniti (315 a. C.), 80.
Tessaglia, guerra in T. durante la seconda macedonica, 184; invasa da
Antioco il Grande (192 a. C.), 190.
Teuta, regina degli Illirii, 134.
Teutoni, 274; invadono la Gallia, 279, 284; sono disfatti e distrutti ai Campi
Putridi presso Aquae Sextiae (102 a. C.), 284.
Thurii, e i Lucani, 95-96; e Roma, 98, 99.
Ticino, battaglia (218 a. C.), 151-52.
Tigrane, re di Armenia, amplia i confini del suo regno, 353; alleato di
Mitridate VI, 294, 349; invade la Siria, 342; e la Grande Cappadocia, 342;
assume il titolo di Re dei Re, 342; Lucullo e Tigrane, 353; si arrende a
Pompeo, 360-61.
Tigranocerta, capoluogo della Armenia, 355; assediata da Lucullo (69 a.
C.), 355; sua capitolazione, 355.
Tigurini, 274; invadono la Narbonese (107 a. C.), 274; si ritirano, 275;
invadono di nuovo la Gallia, 276-277; sconfiggono un generale romano ad
Arausium (6 ottobre 105 a. C.), 277.
Timoleone, tiranno di Siracusa, 110.
Tities, 9.
Titti, 213, 232.
Tivoli, 70.
Tolomei (dinastia regnante in Egitto), nel III sec. a. C., 110. V. Lagidi.
Tolomeo IV, re d’Egitto (morto nel 201 a. C.), 178.
Tolomeo V, Epifane (204 a. C. sgg.), 178.
Tolomeo Apione, re d’Egitto, lascia ai Romani la Cirenaica, 294.
Tolosa, nella Narbonese, 274.
Tracia, terre della T. soggette ai Tolomei, 110; passano alla Macedonia,
che le perde dopo la terza macedonica, 185; i Traci alleati di Mitridate,
281, 312; invadono la Grecia, 310, 342; la T. conquistata da M. Lucullo (72
a. C.), 350.
Trapani (Drepanum), fortezza cartaginese, 128; battaglia (250 a. C.), 128;
bloccata (242 a. C.), 129.
Trasimeno (L.), battaglia (217 a. C.), 155-56.
Trebbia (Fl.), battaglia (218 a. C.), 152-54.
Tresviri agria iudicandis adsignandis, 237, 239; loro lavoro, 243-44.
Triario (C.), ammiraglio di Lucullo, 357; disfatto da Mitridate (67 a. C.),
359.
Tribù, numero e ufficio, 32; nuove tribù (387 a. C.), 54; riforma di Appio
Claudio, 84-85; due nuove tribù istituite nel 242 a. C., 131; 35 tribù, 131; e
la riforma del 241 a. C., 131-32; e la scelta dei giudici, 304-5; gli Italici e le
tribù, 308.
Tribunali penali, V. Quaestiones perpetuae.
Tribuni aerarii, nei tribunali, 353.
Tribuni della plebe, 35; numero, 75; eletti prima dai comizi curiati, poi dai
tributi, 35, 43, n. 3; poteri, 35-36; agitazioni tribunizie dopo il 334 a. C., 56
sgg.; destituibili, 238-39; il tribunato è iterabile?, 241-42; e la riforma di
Silla, 334; abolizione della riforma di Silla, 342-43, 353.
Tribuni militari, 41; in parte elettivi, 85; consulari potestate, 40-41.
Trifano, battaglia, 69.
Trifilia, 186.
Tromentina, tribù romana, 54.
Tullio (M. Cicerone), e la legge Manilia, 360.
Tullo Ostilio, 11, 16.
Tuscolo, 70, 198.
Tyrii, nel secondo trattato romano-cartaginese, 63.
Umbri, 3; e Celti, 47; insurrezione (308 a. C.), 88; nella terza Guerra
sannitica, 92; nella Guerra sociale, 302, 303.
Utica, nel secondo trattato romano-cartaginese, 63; indipendente dopo la
terza punica, 223.
Vaccei (in Spagna), 213.

Vadimone (L.), battaglia (283 a. C.), 97.
Valenza, 232.
Valerio (M. Levino), contro Filippo V (214 a. C.), 162.
Valerio (L. Flacco), protettore di Catone, 198.
Valerio (L. Flacco) (cons. 86 a. C.), sua legge sui debiti, 320; inviato
contro Silla, 320, 321-22, 337, n. 2; in Macedonia e in Asia contro
Mitridate (86 a. C.), 322.
Vario (Q.), (trib. pl. 98 a. C.), 301; esiliato per lesa maestà, 304.
Veio, città etrusca, 4; prime guerre e paci con Roma, 46 sgg.; ultima
guerra con Roma, 47 sgg.; distruzione, 49.
Velina, tribù romana, 131.
Veneti, 3; e Celti, 47; alleati di Roma nella Grande guerra gallica, 141.
Venusia (Venosa), colonia di, (291 a. C.), 93.
Vestali, collegio sacerdotale, 14; Rea Silvia vestale, 7.
Vestini, 3; alleati dei Sanniti nella seconda guerra sannitica, 76.
Vetulonia, città etrusca, 4.
Veterani, I v. e la legge de coloniis di Saturnino, 289; e la cittadinanza,
289; colonie di v. nel Sannio e in Etruria, 333.
Veturio (T. Calvino) (cons. 321 a. C.), alle Forche Caudine, 77-78.
Victumulae (nel Vercellese), 151; centro del commercio dell’oro, 231.
Vie: Appia, 83; Cassia (187 a. C.), 96, 194; Emilia (187 a. C.), 194;
Flaminia (187 a. C.), 194; lex viaria sempronia (123 a. C.), 251; le vie
d’Italia e C. Gracco, 251, 252.
Villio (P.) (cons. 198), generale romano contro Filippo V, 183-84.
Viminale, 17.
Viriato, capo dei Lusitani, 221; suoi successi, 223, 230, 232; ucciso, 232.
Volsci, 3; guerre con Roma, 29, 30; incursioni a mezzo il sec. V a. C., 36;
dopo l’incendio gallico, 53.
Volterra, città etrusca, 4.
Zama (in Numidia), battaglia (202 a C.), 171 sgg.

INDICE DEI CAPITOLI.
Prefazione Pag. v
La Monarchia e il primo tentativo mercantile di

Roma (754?-510? a. C.) 1
I primi passi della repubblica (sec. VI-V a. C.) 27
La distruzione di Veio e l’incendio di Roma
(fine del V sec.-367 a. C.) 45
I Sanniti 61
La guerra con Taranto e la conquista
dell’Italia 91
Roma e Cartagine 109
La prima guerra punica e il secondo tentativo
mercantile di Roma 121
La seconda guerra punica (218-201) 145
L’egemonia mediterranea 177
Il crepuscolo dell’antica Roma 193
La crisi dell’egemonia 211
I Gracchi 225
Verso la rivoluzione 259
Mitridate 287
La prima guerra civile 317
Le grandi guerre in oriente 339
Indice alfabetico analitico 367

Errata Corrige
P. 142, r. 4. Insurbi Insubri

P. 268, r. 3. E qui Edni
P. 339, r. 25. legato legato di
FINITO DI STAMPARE A FIRENZE
NELLA TIPOGRAFIA «ENRICO ARIANI»
IL XXXI MARZO MCMXXI.
Nota del Trascrittore
Ortografia e punteggiatura originali sono state

mantenute, correggendo senza annotazione minimi
errori tipografici. Le correzioni indicate a pag. 401 (Errata
Corrige) sono state riportate nel testo.
Copertina creata dal trascrittore e posta nel pubblico
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Fraud in Financial Statements and Auditor Responsibilities

Multiple Choice Questions

A. Confidentiality and integrity

B. Objectivity and ethics

C. Standard morals and ethics

D. Competence and diligence

D. Talk with a reporter from the Wall Street Journal.

4. The expectations gap refers to:

5. Which of the following is an element of the introductory paragraph of an auditor's report?

A. Identifies the type of opinion the auditor is giving

C. Identifies audit testing and procedures used

A. States the auditor's responsibility to express an opinion on the financial statements

C. States audit provides reasonable basis for the opinion

D. States the audit evaluates the overall financial statement presentation

7. Typically, when a going concern issue exists the auditor should:

A. Issue an unmodified opinion with an emphasis-of-matter paragraph

B. Explain the reasons for the going concern issue

B. Misstatements that are material and pervasive

C. Going concern issue

D. Misstatements that are material but not pervasive

A. Substantive alternative treatments of GAAP

B. Substantive reasons for the adverse opinion

D. Entitled "Basis for Adverse Opinion"

A. The financial statements contain a departure from generally accepted accounting

11. When would it be appropriate for an auditor to withdraw from an engagement?

A. In order to avoid issuing an adverse opinion.

C. When the auditor concludes that management cannot be trusted.

D. When the auditor has overbooked too much work.

A. The required standards apply to all companies

B. The required standards apply to all public companies only

C. The required standards apply to all privately held companies only

D. The required standards apply to all not-for-profit entities

A. Quality of professionals that perform an audit

C. The standards that guide auditors in issuing the audit report

A. Quality of professionals that perform an audit

B. Criteria for judging the quality of audit work

C. Whether the auditor was independent in conducting the audit

A. The financial statements have followed GAAP.

B. Consistency in the application of GAAP.

C. Adequate disclosures exist in the statements.

D. Gathering sufficient audit evidence to warrant an opinion.

A. Auditors do not examine all of the transactions

C. Transactions examined are based on materiality and risk assessment determinations

D. All of these may create doubts about usefulness

17. Which of the following is not correct about materiality?

B. Materiality judgments are made in light of surrounding circumstances and necessarily

D. An auditor's consideration of materiality is influenced by the auditor's perception of the

D. Whether the accounting principles used are appropriate in the circumstances

B. Information and communication systems

D. Independence of the audit committee

D. Illegal acts exist regardless of the effects on the financial statements

A. Bring the matter to the attention of the audit committee

B. Bring the matter to the attention of the SEC