Standing Order on Role of Audit in Relation to Cases of Fraud and Corruption

  1. Examination of system for detection and prevention of fraud and corruption is an integral part of ________ audits.
    1. Regulatory
    2. Performance
    3. Financial
    4. All of the above
  2. Audit officers _________ legal determinations of whether fraud has actually occurred.
    1. make
    2. 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.
    1. Audit Team
    2. management of the audited entity
    3. Vigilance and Corruption Department
    4. All of the above
  4. During audit of financial statements which type of intentional misstatements are relevant to the audit teams?
    1. misstatements resulting from fraudulent financial reporting
    2. misstatements resulting from misappropriation of assets
    3. both ‘A’ and ‘B’
    4. None
  5. The attitude of ‘professional skepticism’ should be avoided by the Audit team in certain cases of Audit.
    1. True
    2. False
  6. The audit teams should clearly understand that the audit evidence obtained can be only persuasive and not conclusive.
    1. False
    2. 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.
    1. True
    2. 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.
    1. Controlling authority concerned
    2. Central / State Vigilance Commission
    3. Lok Ayukta
    4. None of the above
  9. Cases relating to suspected fraud and corruption should be specially highlighted in the concerned _______________.
    1. Inspection Report
    2. Audit Notes
    3. Audit Reports
    4. All of the above
  10. While forwarding the Bond copy of the Audit Reports to Headquarters, the A.G. should indicate ____________.
    1. 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.
    2. 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
    3. both ‘A’ and ‘B’
    4. None
  11. Fraud examination is a part of the normal auditing procedures which includes:
    1. 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.
    2. focusing audit strategy on areas and operations prone to fraud and corruption by developing effective high risk indicators for fraud.
    3. both ‘A’ and ‘B’
    4. None
  12. Which of the following actions amounts to fraud?
    1. a mistake in gathering or processing data from which financial statements are prepared.
    2. an incorrect accounting estimate arising from oversight or misinterpretation of facts.
    3. a mistake in the application of accounting principles relating to measurement, recognition, classification, presentation or disclosure
    4. ‘A’, ‘B’, and ‘C’
    5. None of the above
  13. Fraud does not involve deliberate misrepresentation of facts or significant information to obtain undue or illegal financial advantage.
    1. True
    2. False
  14. Fraud involving one or more members of management or those charged with governance is referred to as ___________.
    1. employee fraud
    2. management fraud
    3. official fraud
    4. none
  15. An act committed in good faith, which by subsequent turn of events, proves to be incorrect or based on wrong information is _________.
    1. a fraud
    2. not a fraud
  16. For an act to come within the ambit of ‘Fraud’ which of the following elements required to be present?
    1. The act is intentional on the part of one or more individuals working in collusion with each other.
    2. The object of the act is to obtain or give illegal advantage in violation of the laws, rules and guidelines existing on the subject.
    3. the intention, collusion and object of obtaining illegal advantage will have to be present when a particular act is committed.
    4. 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’.
    1. True
    2. 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.
    1. True
    2. 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.
    1. True
    2. False
  20. Audit has the sole responsibility of establishing and determining whether a misrepresentation is an error or fraud.
    1. True
    2. 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.
    1. Fraud
    2. Corruption
    3. both
    4. none
  22. The audit personnel should exercise professional skepticism and professional judgment in dealing with possible fraud indicators.
    1. True
    2. False
  23. The example of Active internal control is __________.
    1. Signatures and document countersigning procedures.
    2. Segregation of duties and functions
    3. Physical asset control; real time inventory control
    4. Document matching and cross linking of documents
    5. 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.
    1. True
    2. False
  25. In determining overall responses to address the risk of fraud, the auditor should:
    1. evaluate the accounting and reporting policies used by using different sampling methods
    2. Incorporate an element of unpredictability in the selection of the nature, timing and extent of audit procedures
    3. both ‘A’ and ‘B’
    4. None
  26. IT frauds are committed by _________.
    1. insiders
    2. outsiders
    3. vendors and competitors
    4. All of the above
  27. IT frauds are committed by manipulation of _________.
    1. input
    2. output
    3. throughput
    4. All of the above
  28. For Auditors, the most effective tool is data enquiry, analysis and reporting software such as _________.
    1. ACL
    2. IDEA
    3. Oracle
    4. 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.
    1. Physical access controls
    2. Logical access controls
    3. Security controls
    4. all of the above
  30. The report of the audit party should indicate inter alia _________.
    1. the scope of audit
    2. main findings
    3. total amount involved
    4. 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
    5. 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
    1. Duplicate supply
    2. Duplicate payments
    3. Second payments
    4. None of the above
  32. All cases of fraud and corruption should be followed up vigorously with ________.
    1. the concerned audited entity
    2. the higher executieve authorities
    3. Both
    4. None
  33. All significant cases of fraud and corruption should be followed up with the Secretary of the Adminstrative department concerned.
    1. True
    2. False
  34. In IT Fraud, the documentation should include ________.
    1. 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.
    2. the results of the audit procedures, including those designed to address the risk of management override of controls
    3. Communications about fraud made to management etc.
    4. 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.
    1. Inspection report
    2. Audit report
    3. Audit note
    4. 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.
    1. Central Bureau of Investigation
    2. Central Vigilance Commission
    3. Lok Ayukta
    4. only ‘A’ and ‘B’
    5. All of the above
  37. Which of the following statement is not correct?
    1. 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.
    2. 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
    3. 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.
    1. True
    2. False
  39. Which of the following statement is not correct?
    1. 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.
    2. Change in mode of audit investigation is required to bring out system deficiencies in greater detail rather than mentioning only money value.
    3. Red flagged items should bring out the intention and failure of internal control irrespective of money value.
    4. 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.
    1. Tailored Specifications
    2. Special Specifications
    3. Manipulated Specifications
    4. None
  41. ________ means purchases are made from a fake suppier or contractor.
    1. Fake Contractor
    2. Phantom Contractor
    3. Splitting of purchases
    4. None
  42. Under ‘Splitting of Purchases’, the purchases of goods and services are split ___________.
    1. to avoid open competition
    2. to avoid having to seek the approval of higher authority
    3. Both
    4. None
  43. ________ means the contractor falsifies the goods specifications or his ability to provide certain services.
    1. False representations
    2. False specifications
    3. False agreements
    4. 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.
    1. Stealing of Public Assets
    2. Pilferage of Public Assets
    3. Pilferage of Assets
    4. None of the above
  45. False Invoices means _________.
    1. the contractor or supplier submits invoices for goods that have not been delievered.
    2. the invoices do not properly represent the quantity or quality of goods and services supplied.
    3. the invoices do not properly represent the work done as per contracted specifications.
    4. All of the above
  46. ________ means the contractor or supplier submits inflated invoices.
    1. Inflated pricing
    2. defective invoice
    3. defective pricing
    4. All of the above
  47. _________ means contracts are awarded on the basis of vested interests of the decision makers.
    1. Conflict of interest
    2. Conflict of contracts
    3. Vested interests
    4. none of the above
  48. ________ means contractors or suppliers form cartels to fix artificially high prices for goods and services supplied by them.
    1. Collusive or Cartel Bidding
    2. High Price Bidding
    3. Artificial Bidding
    4. All of the above