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Quiz #2_solutions.pdf

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Trish Stringer

Name: ID# 1. Markus Monroe performed several procedures, including observation and inspection of the company’s plans and business strategies. He also made inquiries of those individuals that were involved in the governance of the company, the internal auditors, and operating personnel. These procedures will help Markus to a) gain an understanding of the client. b) determine fraud possibilities. c) prepare year end closing procedures. d) Ascertain what financial statement note disclosures would be required. 2. When Kathy Karter, CA audited a new client she asked questions about what the client does, how the client functions, the ownership structure of the client and its sources of financing. She was getting an understanding of the client at the a) industry level. b) entity level. c) economy level. d) all of the above. 3. Claudia Martel knows that financial reporting fraud transactions require disclosure. However, she is not sure whether related party transactions require disclosure. You advise her that related party transactions require a) no disclosure. b) disclosure only if there is risk of fraud. c) disclosure. d) auditor judgment. 4. When Sean Green started the preliminary risk identification process at a local dairy during the planning stage of the audit he endeavoured to gather sufficient appropriate evidence. Which of the following elements were involved in the preliminary risk identification? a) going concern risk b) client’s corporate governance c) understanding the IT environment d) all of the above 5. Mary Martini’s team has been asked to tackle three ongoing frauds and her partner has asked her to follow up only on the financial reporting fraud. Which of the following items will she be pursuing?
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