1Chapter 11

Fraud Auditing

Review Questions

11-1Fraudulent financial reporting is an intentional misstatement or omission of amounts or disclosures with the intent to deceive users. Two examples of fraudulent financial reporting are accelerating the timing of recording sales revenue to increase reported sales and earnings, and recording expenses as fixed assets to increase earnings.

11-2Misappropriation of assets is fraud that involves theft of an entity's assets. Two examples are an accounts payable clerk issuing payments to a fictitious company controlled by the clerk, and a sales clerk failing to record a sale and pocketing the cash receipts.

11-3The three conditions of fraud referred to as the "fraud triangle" are (1) Incentives/Pressures; (2) Opportunities; and (3)...