42.
37. In comparing management fraud with employee fraud, the auditor's risk of failing to discover
the fraud is:
greater for management fraud because managers are inherently more deceptive than
employees. greater for management fraud because of management's ability to override existing
internal controls. greater for employee fraud because of the higher crime rate among blue collar
workers. greater for employee fraud because of the larger number of employees in the
organization.
b.
38. The most difficult type of misstatement to detect is fraud based
• on
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a. b. C. d.
The overrecording of transactions. The nonrecording of transactions. Recorded
transactions in subsidiaries. Related party receivable.
39. If several empayees collude to falsify documents, the chance
a normal audit would uncover such acts is: a. very low. b. very high. c. zero. d.
none of the above.
40. If an auditor conducted an audit in accordance with auditing
standards, which of the following would the auditor likely detect? a.
unrecorded transactions b. errors in postings of recorded transactions
C. counterfeit signatures on paid checks d. fraud involving collusion
41. If an auditor was engaged to discover errors and fraud and the
auditor performed extensive detail work, the auditor is expected to detect: a.
Omitted transactions b. Misclassification of account c. Non-compliance with laws
and regulations d. Misappropriation of assets
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