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A stock option is expensed even though the fair value of the
underlying stock on the date of grant was the same as the option's
exercise price.
Revenues for up-front fees are deferred rather than recognized
immediately.
48. The audit of financial statements includes the initial approach of
addressing fraud. How must an auditor address fraud in the planning
stage? (Points: 4)
The auditor must test for fraud in the planning stage by sampling
accounts.
The auditor must consider the likelihood of fraud existing in the
company in the planning stage.
The auditor must realize that most people are honest and not
automatically assume that fraud exists when planning the audit.
The auditor must not be aggressive in its initial approach to fraud
as trust may be lost by the client.
49. Which of the following creates an opportunity for fraud to be
committed in an organization? (Points: 4)
Management demands financial success.
Poor internal control.
Commitments tied to debt covenants.
Management is aggressive in its application of accounting rules.
50. Sam Jones, controller of Mitnikco, spends three days researching
the accounting statements to find loopholes in the "rules" and to make
a case for recognizing revenue earlier, rather than in later years. In
the end, Sam and the other members of management determine that