Quiz: CAS 240: Auditor Responsibilities Relating to Fraud
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1.
Which statement about the presumed fraud risks under CAS 240 is correct? Select the statement that correctly distinguishes the revenue-recognition presumption from the management-override presumption.
The management-override risk can be rebutted for owner-managed entities, but the revenue-recognition risk cannot
The revenue-recognition presumption can be rebutted with documented reasons, but the management-override risk cannot
Both presumptions can be rebutted if controls over financial reporting are effective
Neither presumption applies if the entity has no history of fraud
2.
Which journal entries should receive particular attention when testing for management override under CAS 240? Identify the characteristics that make journal entries more susceptible to fraudulent manipulation.
Only entries below the auditor’s performance materiality threshold
Only recurring entries posted automatically by the accounting system
Entries posted to unusual accounts, by unexpected users, at unusual times, with unusual descriptions, or near period end
Only entries that have already been approved by management
3.
Which factor most directly increases the risk of fraudulent financial reporting? Identify the circumstance that represents a fraud risk factor related to incentives or pressures.
4.
When does an identified misstatement require the auditor to reconsider the risk assessment for fraud? Select the most appropriate response when audit evidence indicates a possible intentional misstatement.
When the misstatement may indicate fraud, the auditor should reconsider the risk assessment and evaluate the implications for other audit procedures
Only after management agrees to adjust the financial statements
Only when the misstatement exceeds overall materiality
Never, because the initial risk assessment cannot be changed