Question 1

The least effective method for comparing financial statement information between companies is:

Accepted Answer

A) to perform ratio analysis. 
B) to perform horizontal analysis. 
C) to study the statement of cash flows. 
D) to focus on changes in financial statement numbers. 
A) to perform ratio analysis. 
B) to perform horizontal analysis. 
C) to study the statement of cash flows. 
D) to focus on changes in financial statement numbers. D

Question 2

Which of the following involves examining percentage changes in account balances from period to period?

Accepted Answer

A) Horizontal analysis 
B) Vertical analysis 
C) Statement mapping 
D) Variance analysis 
A) Horizontal analysis 
B) Vertical analysis 
C) Statement mapping 
D) Variance analysis A

Question 3

Which of the following can be used to simultaneously view the relationships between all numbers on the balance sheet or income statement?

Accepted Answer

A) Horizontal analysis 
B) Vertical analysis 
C) Ratio analysis 
D) Trend analysis 
A) Horizontal analysis 
B) Vertical analysis 
C) Ratio analysis 
D) Trend analysis B

Question 4

What is the practice in which cash receipts are misapplied to hide fictitious receivables called?

Accepted Answer

A) Bill-and-hold 
B) Channel stuffing 
C) Partial shipment 
D) Kiting 
A) Bill-and-hold 
B) Channel stuffing 
C) Partial shipment 
D) Kiting

Question 5

Smart fraudsters will avoid financial statement fraud involving the overstatement of ____ because of the compounding effect from period to period.

Accepted Answer

A) revenue 
B) accounts receivable 
C) inventory 
D) fixed assets 
A) revenue 
B) accounts receivable 
C) inventory 
D) fixed assets

Question 6

Assume that the net sales for a company is $5,000,cost of goods sold is $3,000,and average inventory is $1,500.Calculate the number of days' sales in inventory.

Accepted Answer

A) 145 
B) 274 
C) 110 
D) 183 
A) 145 
B) 274 
C) 110 
D) 183

Question 7

​Which of the following may indicate management fraud?

Accepted Answer

A) ​The name of a relative of a member of upper management is suggested to fill a Board of Directors vacancy. 
B) ​Increases and decreases in inventory fluctuates from period to period. 
C) ​Inconsistencies exist between what management is telling the auditor and what the auditor observes. 
D) ​Several mistakes are discovered in the inventory records. 
A) ​The name of a relative of a member of upper management is suggested to fill a Board of Directors vacancy. 
B) ​Increases and decreases in inventory fluctuates from period to period. 
C) ​Inconsistencies exist between what management is telling the auditor and what the auditor observes. 
D) ​Several mistakes are discovered in the inventory records.

Question 8

Which of the following is NOT true regarding "topside" journal entries used to commit financial statement fraud?

Accepted Answer

A) Upper management usually records the journal entry. 
B) Entries are recorded to subsidiary ledgers. 
C) The journal entry may be recorded after normal business hours. 
D) Entries often bypass the normal process for posting journal entries. 
A) Upper management usually records the journal entry. 
B) Entries are recorded to subsidiary ledgers. 
C) The journal entry may be recorded after normal business hours. 
D) Entries often bypass the normal process for posting journal entries.

Question 9

Which of the following is most likely an indicator of fraud involving inventory overstatement?

Accepted Answer

A) A sudden increase in the inventory turnover ratio. 
B) A sharp decrease in gross profit margin. 
C) A sudden decrease in sales. 
D) A sudden increase in number of days' sales in inventory. 
A) A sudden increase in the inventory turnover ratio. 
B) A sharp decrease in gross profit margin. 
C) A sudden decrease in sales. 
D) A sudden increase in number of days' sales in inventory.

Question 10

Which of the following is a fraud scheme affecting the inventory?

Accepted Answer

A) Refreshing transactions 
B) Side agreements 
C) Double counting 
D) Lapping 
A) Refreshing transactions 
B) Side agreements 
C) Double counting 
D) Lapping

Question 11

​Which of the following is a true statement regarding searching for Inventory analytical symptoms?

Accepted Answer

A) ​Examining the changes in recorded amounts from period to period provides useful information regarding potential fraud. 
B) ​Studying the statement of cash flows is not a useful means of looking for potential fraud. 
C) ​Utilizing vertical analysis for the current year is a useful means of identifying potential fraud. 
D) The pace of the change in the numbers can often be indicative of potential fraud. 
A) ​Examining the changes in recorded amounts from period to period provides useful information regarding potential fraud. 
B) ​Studying the statement of cash flows is not a useful means of looking for potential fraud. 
C) ​Utilizing vertical analysis for the current year is a useful means of identifying potential fraud. 
D) The pace of the change in the numbers can often be indicative of potential fraud.

Question 12

Which of the following can be used by fraud examiners to sift through millions of journal entries to find the potentially fraudulent few?

Accepted Answer

A) Microsoft Access 
B) SPSS 
C) ODBC 
D) ACL 
A) Microsoft Access 
B) SPSS 
C) ODBC 
D) ACL

Question 13

When a company records fictitious revenues,what is the effect on asset turnover ratio?

Accepted Answer

A) The ratio increases 
B) The ratio decreases 
C) No effect 
D) The ratio might increase or decrease depending upon the transaction. 
A) The ratio increases 
B) The ratio decreases 
C) No effect 
D) The ratio might increase or decrease depending upon the transaction.

Question 14

What is the difficulty in using horizontal,vertical,or ratio analysis?

Accepted Answer

A) The complicated calculations required to arrive at change statements. 
B) Identifying the changes and speed of changes in the ratios, when the change is unexpected or unexplained. 
C) Knowing when a change in account balance or relationship is significant enough to signal possible fraud. 
D) Assessing the magnitude or significance of changes in account balances looking only at raw financial statement numbers. 
A) The complicated calculations required to arrive at change statements. 
B) Identifying the changes and speed of changes in the ratios, when the change is unexpected or unexplained. 
C) Knowing when a change in account balance or relationship is significant enough to signal possible fraud. 
D) Assessing the magnitude or significance of changes in account balances looking only at raw financial statement numbers.

Question 15

Which of the following is a common inventory-related fraud scheme?

Accepted Answer

A) Channel stuffing 
B) Cutoff problems 
C) Related-party transactions 
D) Side agreements 
A) Channel stuffing 
B) Cutoff problems 
C) Related-party transactions 
D) Side agreements

Question 16

Why is it that horizontal analysis is performed only on the income statement and balance sheet,but not on the statement of cash flows?

Accepted Answer

A) When searching for fraud, examining the statement of cash flows is not as effective as comparing actual changes in account balances. 
B) Horizontal analysis converts balance sheet and income statement to change statements whereas the statement of cash flow is already a change statement. 
C) The statement cash flow of cash flows does not provide any valuable fraud-related information. 
D) Horizontal analysis of balance sheets and income statements is relatively easy, while applying the same procedure to the statement cash flows is complicated. 
A) When searching for fraud, examining the statement of cash flows is not as effective as comparing actual changes in account balances. 
B) Horizontal analysis converts balance sheet and income statement to change statements whereas the statement of cash flow is already a change statement. 
C) The statement cash flow of cash flows does not provide any valuable fraud-related information. 
D) Horizontal analysis of balance sheets and income statements is relatively easy, while applying the same procedure to the statement cash flows is complicated.

Question 17

When using ratios to discover financial statement fraud,what is typically the most important aspect to evaluate?

Accepted Answer

A) The size of the ratio 
B) The direction of the ratio 
C) The change in the ratio 
D) The complexity of the ratio 
A) The size of the ratio 
B) The direction of the ratio 
C) The change in the ratio 
D) The complexity of the ratio

Question 18

Inventory fraud often involves overstating inventory and/or understating cost of goods sold.The result is a decrease in the:

Accepted Answer

A) gross profit ratio. 
B) inventory turnover ratio. 
C) number of days sales in inventory. 
D) accounts receivable turnover ratio. 
A) gross profit ratio. 
B) inventory turnover ratio. 
C) number of days sales in inventory. 
D) accounts receivable turnover ratio.

Question 19

​Which of the following is a symptom of potential inventory fraud?

Accepted Answer

A) ​an auditor observing a weakness in the inventory-receiving procedures 
B) ​an auditor observing an override of an internal control 
C) ​an auditor observing inadequate physical controls in the warehouse 
D) ​an auditor observing the lack of authorization required for purchases of inventory under $1,000 
A) ​an auditor observing a weakness in the inventory-receiving procedures 
B) ​an auditor observing an override of an internal control 
C) ​an auditor observing inadequate physical controls in the warehouse 
D) ​an auditor observing the lack of authorization required for purchases of inventory under $1,000

Question 20

Which of the following tends to be the most common method for understating cost of goods sold?

Accepted Answer

A) Understating purchases 
B) Overstating purchase returns 
C) Overstating inventory 
D) Overstating purchase discounts 
A) Understating purchases 
B) Overstating purchase returns 
C) Overstating inventory 
D) Overstating purchase discounts

The least effective method for comparing financial statement information between companies is:

Which of the following involves examining percentage changes in account balances from period to period?

Which of the following can be used to simultaneously view the relationships between all numbers on the balance sheet or income statement?

What is the practice in which cash receipts are misapplied to hide fictitious receivables called?

Smart fraudsters will avoid financial statement fraud involving the overstatement of ____ because of the compounding effect from period to period.

Assume that the net sales for a company is $5,000,cost of goods sold is $3,000,and average inventory is $1,500.Calculate the number of days' sales in inventory.

Which of the following may indicate management fraud?

Which of the following is NOT true regarding "topside" journal entries used to commit financial statement fraud?

Which of the following is most likely an indicator of fraud involving inventory overstatement?

Which of the following is a fraud scheme affecting the inventory?

Which of the following is a true statement regarding searching for Inventory analytical symptoms?

Which of the following can be used by fraud examiners to sift through millions of journal entries to find the potentially fraudulent few?

When a company records fictitious revenues,what is the effect on asset turnover ratio?

What is the difficulty in using horizontal,vertical,or ratio analysis?

Which of the following is a common inventory-related fraud scheme?

Why is it that horizontal analysis is performed only on the income statement and balance sheet,but not on the statement of cash flows?

When using ratios to discover financial statement fraud,what is typically the most important aspect to evaluate?

Inventory fraud often involves overstating inventory and/or understating cost of goods sold.The result is a decrease in the:

Which of the following is a symptom of potential inventory fraud?

Which of the following tends to be the most common method for understating cost of goods sold?

The Nature of Fraud

Who Commits Fraud and Why

Fighting Fraud: an Overview

Preventing Fraud

Recognizing the Symptoms of Fraud

Data-Driven Fraud Detection

Investigating Theft Acts

Investigating Concealment

Conversion Investigation Methods

Inquiry Methods and Fraud Reports

Financial Statement Fraud

Liability, asset, and Inadequate Disclosure Frauds

Fraud Against Organizations

Consumer Fraud

Bankruptcy, divorce, and Tax Fraud

E-Commerce Fraud

Legal Follow-Up

Filters

Exam 12: Revenue- and Inventory-Related Financial Statement Frauds

The least effective method for comparing financial statement information between companies is:

Which of the following involves examining percentage changes in account balances from period to period?

Which of the following can be used to simultaneously view the relationships between all numbers on the balance sheet or income statement?

What is the practice in which cash receipts are misapplied to hide fictitious receivables called?

Smart fraudsters will avoid financial statement fraud involving the overstatement of ____ because of the compounding effect from period to period.

Assume that the net sales for a company is $5,000,cost of goods sold is $3,000,and average inventory is $1,500.Calculate the number of days' sales in inventory.

​Which of the following may indicate management fraud?

Which of the following is NOT true regarding "topside" journal entries used to commit financial statement fraud?

Which of the following is most likely an indicator of fraud involving inventory overstatement?

Which of the following is a fraud scheme affecting the inventory?

​Which of the following is a true statement regarding searching for Inventory analytical symptoms?

Which of the following can be used by fraud examiners to sift through millions of journal entries to find the potentially fraudulent few?

When a company records fictitious revenues,what is the effect on asset turnover ratio?

What is the difficulty in using horizontal,vertical,or ratio analysis?

Which of the following is a common inventory-related fraud scheme?

Why is it that horizontal analysis is performed only on the income statement and balance sheet,but not on the statement of cash flows?

When using ratios to discover financial statement fraud,what is typically the most important aspect to evaluate?

Inventory fraud often involves overstating inventory and/or understating cost of goods sold.The result is a decrease in the:

​Which of the following is a symptom of potential inventory fraud?

Which of the following tends to be the most common method for understating cost of goods sold?

The Nature of Fraud

Who Commits Fraud and Why

Fighting Fraud: an Overview

Preventing Fraud

Recognizing the Symptoms of Fraud

Data-Driven Fraud Detection

Investigating Theft Acts

Investigating Concealment

Conversion Investigation Methods

Inquiry Methods and Fraud Reports

Financial Statement Fraud

Liability, asset, and Inadequate Disclosure Frauds

Fraud Against Organizations

Consumer Fraud

Bankruptcy, divorce, and Tax Fraud

E-Commerce Fraud

Legal Follow-Up

Filters

Which of the following may indicate management fraud?

Which of the following is a true statement regarding searching for Inventory analytical symptoms?

Which of the following is a symptom of potential inventory fraud?