2) The CICPA has a code of professional conduct.
Answer: TRUE
Diff: 1 Type: TF
L.O.: 1-5
CPA COMPETENCIES: Chapter 1
1.1.1 Evaluates financial reporting needs
1.1.2 Evaluates the appropriateness of the basis of financial reporting
1.1.3 Evaluates reporting processes to support reliable financial reporting
3) The most common form of management fraud is earnings management.
Answer: TRUE
Diff: 2 Type: TF
L.O.: 1-5
CPA COMPETENCIES: Chapter 1
1.1.1 Evaluates financial reporting needs
1.1.2 Evaluates the appropriateness of the basis of financial reporting
1.1.3 Evaluates reporting processes to support reliable financial reporting
4) Identify and briefly describe the two most common types of fraud that impact financial statements.
Answer: The two most common types of fraud that impact financial statements are misappropriation of assets and fraudulent financial reporting. Misappropriation of assets involves employees stealing cash or other assets such as inventory from the company. Fraudulent financial reporting occurs when managers make false and misleading entries in the books making financial results of the company appear better than they actually are.
Diff: 2 Type: ES
L.O.: 1-5
CPA COMPETENCIES: Chapter 1
1.1.1 Evaluates financial reporting needs
1.1.2 Evaluates the appropriateness of the basis of financial reporting
1.1.3 Evaluates reporting processes to support reliable financial reporting
5) Fraudulent financial reporting is a type of fraud than impacts on financial statements. Why do managers undertake this type of fraudulent activity?
Answer: Managers falsify financial reporting to deceive investors and creditors into loaning money to or investing in the company when they may not have done so otherwise.
Diff: 2 Type: ES
L.O.: 1-5
CPA COMPETENCIES: Chapter 1
1.1.1 Evaluates financial reporting needs
1.1.2 Evaluates the appropriateness of the basis of financial reporting
1.1.3 Evaluates reporting processes to support reliable financial reporting