Chapter 14: Fraud and Error Quiz

Fraud is an unintentional act involving the use of deception that results in a material misstatement of the financial statements.

Misstatements arising from misappropriation of assets and misstatements arising from fraudulent financial reporting are the major types of misstatements.

The elements of a fraud triangle include pressure, rationalization, and opportunity.

The risk factors that contribute to misappropriation of assets are primarily related to employees' financial difficulties and personal vices.

The prevention and detection of fraud in a business enterprise is primarily the responsibility of the internal auditors.

Errors in recording sales can include using a wrong piece or wrong quantity, but not recording sales in the wrong period (cutoff errors).

Fraud in sales generally relates to misappropriation of assets, while fraud in cash collections relates to fraudulent financial reporting.

Frauds in cash collections are typically accomplished by clerks or management-level employees.

The prevention and detection of fraud in a business enterprise is primarily the responsibility of the internal auditors.

Risk factors that contribute to misappropriation of assets are primarily related to employees' financial difficulties and personal vices.