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ACCT 520- Part 1 unit 8 (1)
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ACCT 520- Part 1 unit 8 (1)
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ACCT 520- Part 1 unit 8Internal auditors assist in fraud prevention by evaluating controls. An internal auditor is most
likely to conclude that which segregation of duties is unnecessary?
A.Preparing a sales order and approving extension of credit to the customer.
B.Ordering goods and receiving the goods.
C.Negotiating a contract and approving payments.
D.Approving an electronic payment and verifying receipt of a good or service. - ANS-Answer D
is correct. When feasible, segregation of duties divides responsibility for recording of the
transaction, authorization, and custody of the assets associated with the transaction. The effect
is to minimize the opportunities for a person to be able to perpetrate and conceal fraud or error.
However, person(s) responsible for signing checks or approving electronic payments should
verify that a service or product was received. Verifying receipt involves communication with the
person responsible for custody.
Internal auditors and management have become increasingly concerned about computer fraud.
Which of the following control procedures is least important in preventing computer fraud?
A.Program change control requiring a distinction between production programs and test
programs.
B.Segregation of duties between the applications programmer and the program librarian
function.
C.Segregation of duties between the programmer and systems analyst.
D.Testing of new applications by users during the systems development process. - ANS-Answer
C is correct. Programmers modify programs, data files, and controls. A systems analyst uses his
or her detailed knowledge of the organization's databases and applications programs to
determine how an application system should be designed to best serve the users' needs. Those
duties are often combined with those of applications programmers.
When conducting fraud investigations, internal auditors should
A.Assign personnel to the investigation in accordance with the engagement schedule
established at the beginning of the fiscal year.
B.Assess the probable level of, and the extent of complicity in, the fraud within the organization.
C.Clearly indicate the extent of the internal auditors' knowledge of the fraud when questioning
suspects.
D.Perform its investigation independently of lawyers, security personnel, and specialists from
outside the organization who are involved in the investigation. - ANS-Answer B is correct. When
conducting fraud investigations, internal auditors or others should assess the level of, and the
extent of complicity in, the fraud within the organization. This assessment can be critical to
, ensuring that (1) crucial evidence is not tainted or destroyed and (2) misleading information is
not obtained from persons who may be involved.
When developing engagement objectives, internal auditors ordinarily must consider
A.Performing specific procedures to identify fraud indicators.
B.The probability of significant fraud, errors, or noncompliance.
C.Procedures sufficient to detect all fraud.
D.The investigation that would be conducted by an expert in fraud detection. - ANS-Answer B is
correct. According to Implementation Standard 1220.A1, internal auditors must exercise due
professional care by, among other things, considering the "probability of significant errors, fraud,
or noncompliance." Internal auditors therefore must consider the probability of fraud when
developing engagement objectives (Impl. Std. 2210.A2).
An upcoming internal audit engagement involves the possibility of fraud. The Standards require
the internal auditors to possess which of the following skills?
A.To be able to identify indicators that fraud may have been committed.
B.To possess technical expertise in a particular area of fraud examination, such as computer
hacking.
C.To hold a current Certified Fraud Examiner certification.
D.To hold a current Certified Internal Auditor certification. - ANS-Answer A is correct. An internal
auditor's responsibilities for the detection of fraud include (1) having sufficient knowledge to
identify indicators that fraud may have been committed, (2) being alert to opportunities that
could allow fraud (e.g., control weaknesses), and (3) being able to evaluate the indicators of
fraud sufficiently to determine whether a fraud investigation should be conducted.
How does fraud awareness training support fraud prevention?
A.Helps develop credible responses to potential risks.
B.Facilitates the testing of controls.
C.Reduces opportunities to commit fraud.
D.Limits rationalization. - ANS-Answer D is correct. An individual justifies fraudulent actions by
rationalization. Fraud awareness training minimizes rationalization by (1) supporting the ethical
tone at the top, (2) promoting an anti-fraud environment, and (3) emphasizing that the
organization does not tolerate misconduct of any kind.
After noting some red flags, an internal auditor has an increased awareness that fraud may be
present. Which of the following best describes the internal auditor's responsibility?
Answers
A.Consult with external legal counsel to determine the course of action to be taken, including
the approval of the proposed engagement work program to make sure it is acceptable on legal
grounds.
B.Expand activities to determine whether an investigation is warranted.
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