ACFE Auditing and Internal Controls 2

Question 1

Under the Sarbanes-Oxley Act (SOX) Section 404, who is responsible for assessing the effectiveness of internal controls over financial reporting?

Accepted Answer

Management and the external auditor

Answer

SOX Section 404 requires both management to assess and report on internal controls over financial reporting and the external auditor to attest to that assessment.

Question 2

Which auditing standard requires external auditors to assess the risk of material misstatement due to fraud in every audit?

Accepted Answer

AU-C Section 240 / ISA 240

Answer

AU-C 240 (US GAAS) and ISA 240 (international) require auditors to specifically consider and assess the risk of material misstatement arising from fraud in every financial statement audit.

Question 3

A 'compensating control' is best described as:

Accepted Answer

A control that mitigates risk when the primary control cannot be implemented

Answer

A compensating control is an alternative control that reduces risk to an acceptable level when the ideal primary control—such as segregation of duties—cannot be practically implemented.

Question 4

Which of the following best describes the purpose of a 'surprise audit' in a fraud prevention program?

Accepted Answer

To deter fraud by introducing the unpredictability of detection

Answer

Surprise audits deter fraud by removing the predictability that allows fraudsters to conceal their schemes before a scheduled audit.

Question 5

The 'fraud triangle,' as described in the ACFE's guidance, consists of which three elements?

Accepted Answer

Pressure, opportunity, and rationalization

Answer

The fraud triangle identifies three conditions that are typically present when fraud occurs: perceived pressure (incentive/need), perceived opportunity, and the ability to rationalize the act.

(ACFE) Association of Certified Fraud Examiners Practice Test

(ACFE) Association of Certified Fraud Examiners Practice Test

ACFE Auditing and Internal Controls 2