MCQs for SA 230, 240 & 265- You are the audit senior in charge of the audit of Swandive Co, and have

MCQs for SA 230, 240 & 265-

You are the audit senior in charge of the audit of Swandive Co, and have been informed by your
audit manager that during the current year a fraud occurred at the client. A payroll clerk sets up
fictitious employees and the wages were paid into the clerk’s own bank account. This clerk has
subsequently left the company, but the audit manager is concerned that additional frauds have
taken place in the wages department. Which of the following audit procedures would be
undertaken during the audit of wages as a result of the manager’s assessment of the increased
risk of fraud?
1. Discuss with the payroll manager the nature of the payroll fraud, how it occurred, and the
financial impact of amounts incorrectly paid into the payroll clerk’s bank account.
2. Review the supporting documentation to confirm the total of the fraudulent payments
made and assess the materiality of this misstatement.
3. Review and test the internal controls surrounding setting up of and payments to new
joiners to assess whether further frauds may have occurred.
4. Review the legal action taken by the management against the payroll clerk who was
involved in the fraud and see whether he is punished for his actions.

a) Audit procedures 1,2,3
b) Audit procedures 2,3,4
c) Audit procedures 1,3,4
d) Audit procedures 1,2,4