Standing Order on Role of Audit in Relation to
Cases of Fraud and Corruption
(Answer highlighted with Bold letters)
1. Examination of system for detection and
prevention of fraud and corruption is an integral part of ________ audits.
A. Regulatory
B. Performance
C. Financial
D. All of the above
2. Audit officers _________ legal determinations of
whether fraud has actually occurred.
A. make
B. do not make
3. The responsibility for the prevention and
detection of fraud and error rests primarily with the ___________ through the
implementation and continued operation of accounting and control systems
designed to check the fraud.
A. Audit Team
B. management of the audited entity
C. Vigilance and Corruption Department
D. All of the above
4. During audit of financial statements which type
of intentional misstatements are relevant to the audit teams?
A. misstatements resulting from fraudulent
financial reporting
B. misstatements resulting from misappropriation of
assets
C. both ‘A’ and ‘B’
D. None
5. The attitude of ‘professional skepticism’ should
be avoided by the Audit team in certain cases of Audit.
A. True
B. False
6. The audit teams should clearly understand that
the audit evidence obtained can be only persuasive and not conclusive.
A. False
B. True
7. While reporting all cases of suspected or
presumptive fraud or corruption, the audit officers are expected to provide
their own judgment regarding the existence of fraud and corruption.
A. True
B. False
8. Reports of individual cases of suspected
fraud/corruption should be confidentially addressed, in the first instance, to
the _______ with the approval of the Group officers.
A. Controlling authority concerned
B. Central / State Vigilance Commission
C. Lok Ayukta
D. None of the above
9. Cases relating to suspected fraud and corruption
should be specially highlighted in the concerned _______________.
A. Inspection Report
B. Audit Notes
C. Audit Reports
D. All of the above
10. While forwarding the Bond copy of the Audit Reports to
Headquarters, the A.G. should indicate ____________.
A. in the forwarding letter the number of cases of
fraud and corruption included in the report together with the money value of
the concerned paras.
B. in the submission note of the file relating to
the bond copy, the number of cases of suspected fraud and corruption in the
Report should be highlighted together with the money value of concerned paras
C. both ‘A’ and ‘B’
D. None
11. Fraud examination is a part of the normal auditing procedures
which includes:
A. being alert for situations, control weaknesses,
inadequacies in record keeping, errors and unusual transactions or results,
which could be indicative of fraud, corruption, improper expenditure or lack of
probity.
B. focusing audit strategy on areas and operations
prone to fraud and corruption by developing effective high risk indicators for
fraud.
C. both ‘A’ and ‘B’
D. None
12. Which of the following actions amounts to fraud?
A. a mistake in gathering or processing data from
which financial statements are prepared.
B. an incorrect accounting estimate arising from
oversight or misinterpretation of facts.
C. a mistake in the application of accounting
principles relating to measurement, recognition, classification, presentation
or disclosure
D. ‘A’, ‘B’, and ‘C’
E. None of the above
13. Fraud does not involve deliberate misrepresentation of facts or
significant information to obtain undue or illegal financial advantage.
A. True
B. False
14. Fraud involving one or more members of management or those charged
with governance is referred to as ___________.
A. employee fraud
B. management fraud
C. official fraud
D. none
15. An act committed in good faith, which by subsequent turn of
events, proves to be incorrect or based on wrong information is _________.
A. a fraud
B. not a fraud
16. For an act to come within the ambit of ‘Fraud’ which of the
following elements required to be present?
A. The act is intentional on the part of one or
more individuals working in collusion with each other.
B. The object of the act is to obtain or give
illegal advantage in violation of the laws, rules and guidelines existing on
the subject.
C. the intention, collusion and object of obtaining
illegal advantage will have to be present when a particular act is committed.
D. All of the above
17. Normally any such act which would causes lose to exchequer or be
against public interest will be treated as ‘Fraud’.
A. True
B. False
18. In Government auditing, it might be appropriate to set higher
materiality levels than the private sector auditing to ensure higher level of
accountability requirements.
A. True
B. False
19. Though traditionally materiality has been one of the prime factors
to determine the audit priority, in case of fraud detection, since the act is
illegal, materiality assumes lower significance.
A. True
B. False
20. Audit has the sole responsibility of establishing and determining
whether a misrepresentation is an error or fraud.
A. True
B. False
21. _________ involves behavior on the part of officials in the public
and private sectors, in which they improperly and unlawfully enrich themselves
and those close to them, or induce others to do so, by misusing the position in
which they are placed.
A. Fraud
B. Corruption
C. both
D. none
22. The audit personnel should exercise professional skepticism and
professional judgment in dealing with possible fraud indicators.
A. True
B. False
23. The example of Active internal control is __________.
A. Signatures and document countersigning
procedures.
B. Segregation of duties and functions
C. Physical asset control; real time inventory
control
D. Document matching and cross linking of documents
E. All of the above
24. When auditors intend to report on fraud and corruption, they
should ensure the reliability of audit evidence by verifying it with source
documents including third party evidence.
A. True
B. False
25. In determining overall responses to address the risk of fraud, the
auditor should:
A. evaluate the accounting and reporting policies
used by using different sampling methods
B. Incorporate an element of unpredictability in
the selection of the nature, timing and extent of audit procedures
C. both ‘A’ and ‘B’
D. None
26. IT frauds are committed by _________.
A. insiders
B. outsiders
C. vendors and competitors
D. All of the above
27. IT frauds are committed by manipulation of _________.
A. input
B. output
C. throughput
D. All of the above
28. For Auditors, the most effective tool is data enquiry, analysis
and reporting software such as _________.
A. ACL
B. IDEA
C. Oracle
D. only ‘A’ and ‘B’
29. It is particularly important for the auditor of the IT system to
assess in his audit the level of ___________ built in and if these are in tune
with the sensitivity of data.
A. Physical access controls
B. Logical access controls
C. Security controls
D. all of the above
30. The report of the audit party should indicate inter alia
_________.
A. the scope of audit
B. main findings
C. total amount involved
D. modus operandi of the suspected fraud or the
irregularity , accountability for the same and recommendations for improvement
of internal control system, fraud prevention and detection measures
E. All of the above
31. _________ means the contractor or supplier claims and receives
payment for the same service or work done or goods supplied under the same or
different contracts
A. Duplicate supply
B. Duplicate payments
C. Second payments
D. None of the above
32. All cases of fraud and corruption should be followed up vigorously
with ________.
A. the concerned audited entity
B. the higher executieve authorities
C. Both
D. None
33. All significant cases of fraud and corruption should be followed
up with the Secretary of the Adminstrative department concerned.
A. True
B. False
34. In IT Fraud, the documentation should include ________.
A. The identical and assessed risks of fraud, the
overall responsed of the auditor to the assessed risk of fraud and the nature,
timing and extent of audit procedures and the linkage of those procedures with
the assessed risk of fraud.
B. the results of the audit procedures, including
those designed to address the risk of management override of controls
C. Communications about fraud made to management
etc.
D. All of the above
35. The situations/events that may be suggestive of fraud/presumptive
fraud should be highlighted in the _________ with a recommendation to the
executive for detailed investigation and response.
A. Inspection report
B. Audit report
C. Audit note
D. All of the above
36. In addition to reporting to the management of the audited entity,
material/significant cases of fraud and corruption may be reported through
separate confidential letters to __________ in case of Union Government.
A. Central Bureau of Investigation
B. Central Vigilance Commission
C. Lok Ayukta
D. only ‘A’ and ‘B’
E. All of the above
37. Which of the following statement is not correct?
A. In case of financial audit, instances of
possible fraud and corruption may require qualification in the Audit Opinion on
financial statements, depending upon the materiality of the audit findings.
B. When in the opinion of the auditor the financial
statements include material fraudulent transactions or such transactions have
not been adequately disclosed, or the audit conducted by the auditor leads him
to the inference that instances of fraud and or corruption have taken place and
when the auditor has adequate evidence to support the conclusion, he should
qualify the audit certificate/opinion and ensure that his findings are
adequately included in his audit report
C. The term fraud or corruption may be used in a
conclusive sense if the auditor feels so.
38. The term fraud or corruption may not be used in a conclusive sense
unless such action is established in a court of law.
A. True
B. False
39. Which of the following statement is not correct?
A. Each field office should establish a database of
fraud or corruption related audit issues for building a linkage across
functional groups to identify red flag items.
B. Change in mode of audit investigation is
required to bring out system deficiencies in greater detail rather than
mentioning only money value.
C. Red flagged items should bring out the intention
and failure of internal control irrespective of money value.
D. The data base need not be reviewed by the
Accountant General.
40. _____________ means specifications and time limits are manipulated
to favor a certain contractor or supplier.
A. Tailored Specifications
B. Special Specifications
C. Manipulated Specifications
D. None
41. ________ means purchases are made from a fake suppier or
contractor.
A. Fake Contractor
B. Phantom Contractor
C. Splitting of purchases
D. None
42. Under ‘Splitting of Purchases’, the purchases of goods and
services are split ___________.
A. to avoid open competition
B. to avoid having to seek the approval of higher
authority
C. Both
D. None
43. ________ means the contractor falsifies the goods specifications
or his ability to provide certain services.
A. False representations
B. False specifications
C. False agreements
D. All of the above
44. ___________ means public funds are used to acquire goods for
personal use or public assets pilfered(stealing small amount or articles) by
officials.
A. Stealing of Public Assets
B. Pilferage of Public Assets
C. Pilferage of Assets
D. None of the above
45. False Invoices means _________.
A. the contractor or supplier submits invoices for
goods that have not been delievered.
B. the invoices do not properly represent the
quantity or quality of goods and services supplied.
C. the invoices do not properly represent the work
done as per contracted specifications.
D. All of the above
46. ________ means the contractor or supplier submits inflated
invoices.
A. Inflated pricing
B. defective invoice
C. defective pricing
D. All of the above
47. _________ means contracts are awarded on the basis of vested
interests of the decision makers.
A. Conflict of interest
B. Conflict of contracts
C. Vested interests
D. none of the above
48. ________ means contractors or suppliers form cartels to fix
artificially high prices for goods and services supplied by them.
A. Collusive or Cartel Bidding
B. High Price Bidding
C. Artificial Bidding
D. All of the above
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