Question 1

During an external audit, the audit team identifies evidence that management has intentionally omitted some expenses from the company's financial statements in order to conceal an asset misappropriation scheme. However, the amount of the resulting misstatement does not meet the quantitative materiality threshold for the audit. Which of the following is TRUE regarding this situation?

Options :

A :

The auditors should assume that all audit evidence collected previously is unreliable and withdraw from the audit engagement

B :

The auditors should assess the need to adjust the nature, timing, and extent of remaining audit procedures based on this evidence.

C :

The auditors can ignore the misstatement because the omitted amount is less than the quantitative materiality threshold and therefore immaterial to the audit.

D :

The auditors do not need to be concerned with this evidence, as asset misappropriation schemes are not considered relevant or material for external audit purposes.

Answer: B

Question 2

Which of the following choices is an example of an anti-fraud control that is primarily preventive in nature?

Options :

A : Continuous audit techniques

B : Proactive data analysis techniques

C : Employee background checks

D : Whistleblower hotline

Answer: C

Question 3

Employee anti-fraud education should:

Options :

A : Include descriptions of the procedures that management uses to detect fraud.

B : Include examples of prior employee misconduct and how those situations were handled.

C : Be restricted to formal educational mechanisms to reinforce the importance of the message.

D : Be presented by organizational executives or anti-fraud professionals only.

Answer: B

Question 4

To plan for strategic safety stock, a manufacturer needs to estimate the likelihood and the consequences of running out of stock. What are some common costs that a manufacturer might face in a stock out situation? Select TWO that apply.

Options :

A : Extra costs for urgent transportation

B : Costs of handling inventory

C : Costs of approving the requisition

D : Cost of equipment downtime

E : Costs for qualifying suppliers

Answer: A,D

Question 5

Trevino Ltd is a facility management company which is managing 12 high-rise buildings accross the city. Maintenance of those building accounts for a significant part of Trevino's budget. The company often outsource this service to third party providers. Which of the following can assist Trevino in managing the performance of these suppliers?

Options :

A : Stock turn rate

B : Just In Time (JIT)

C : Total cost of ownership

D : Service Level Agreement (SLA)

Answer: D

Free CFE-Fraud-Prevention-and-Deterrence Mock Exam – Practice Online Confidently

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