89. Sam Jones controller of Mitnikco spends three days researching the accounting statements to find loopholes in the “rules” and to make a case for recognizing revenue earlier rather than in later years. In the end Sam and the other members of management determine that they will reduce the company’s deferred revenue accounts and begin accounting for all revenues as agreements are signed. What are the motivations of Mitnikco management based solely on the information above? a. Pressures. b. Opportunity. c. Rationalization. d. Skepticism. 90. There are many important reasons for diligent audit planning. If an audit firm wrongly skips the planning stage of an audit what will be the effect relative to fraud detection? a. The firm will not be able to apply GAAP to the financial statements. b. The firm will not adequately identify the types of fraud that may occur in the client company. c. The firm will not be able to perform direct tests of account balances. d. The firm will lack the competency and technical training necessary to complete the audit in accordance with GAAS. 91. Which of the following statements about fraud or fraud detection is true? a. Management may physically alter evidence to perpetrate and conceal the fraud. b. Fraudulent financial reporting is generally not material enough to consider. c. Journal entries will supply evidence necessary to detect fraud. d. The advent of new technology prevents fraud thereby leading to less fraud over time. 92. How did the Sarbanes-Oxley Act strengthen auditor independence? a. By requiring auditors to provide reports in accordance with the Foreign Corrupt Practices Act. b. By requiring auditors to report the nature of any auditor-client disagreements to the SEC. c. By requiring the lead partner to rotate off the audit engagement at least every five years. d. By requiring a different audit firm from the one that performs the audit to prepare the client’s tax return. 93. Which of the following frauds involved primarily asset misappropriation? a. Enron. b. Worldcom. c. Dell. d. Koss. 94. Which of the following factors should an auditor consider in evaluating the effect of fraud upon the planned audit procedures? a. The type of fraud that may occur. b. The potential materiality of fraud. c. The likelihood of fraud occurring. d. All of the above. 95. How frequently does the PCAOB inspect registered accounting firms that audit 100 or more issuers? a. Annually b. Every two years. c. Every three years d. Every five years. 96. The PCAOB has how many board members? a. Three b. Five c. Seven d. Nine 97. Which of the following is a responsibility of the PCAOB? a. To set financial reporting standards for public companies. b. To set financial reporting standards for private companies. c. To set audit standards for public companies. d. To set audit standards for private companies. 98. How often does the PCAOB inspect registered accounting firms that audit fewer than 100 issuers? a. Annually b. Every two years. c. Every three years. d. Every five years.
