Question 1

Which of the following is a potential revenue-related fraud scheme?

Accepted Answer

A) Cutoff problems 
B) Double counting 
C) Holding items on consignment 
D) Partial shipment 
A) Cutoff problems 
B) Double counting 
C) Holding items on consignment 
D) Partial shipment

Question 2

Overstating of sales in the income statement leads to:

Accepted Answer

A) decrease in inventory turnover ratio. 
B) decrease in EPS. 
C) increase in gross profit ratio. 
D) decrease in accounts receivable ratio. 
A) decrease in inventory turnover ratio. 
B) decrease in EPS. 
C) increase in gross profit ratio. 
D) decrease in accounts receivable ratio.

Question 3

Which of the following is a rare situation that may arise in a privately owned company that wants to decrease the amount of income taxes paid to the government?

Accepted Answer

A) Understating purchases 
B) Overstating net income 
C) Understating inventory 
D) Understating cost of good sold 
A) Understating purchases 
B) Overstating net income 
C) Understating inventory 
D) Understating cost of good sold

Question 4

Which of the following is a commonly used ratio to discover inventory-related fraud?

Accepted Answer

A) Number of days' in receivable ratio 
B) Sales return percentage ratio 
C) Gross profit ratio 
D) Earnings per share 
A) Number of days' in receivable ratio 
B) Sales return percentage ratio 
C) Gross profit ratio 
D) Earnings per share

Question 5

Which of the following is a lifestyle symptom associated with revenue-related fraud?

Accepted Answer

A) Too little cash is collected relative to reported revenues. 
B) Weaknesses in the cutoff processes or other key accounting processes. 
C) Untrue responses by management to queries about revenue-related accounts. 
D) Executives' personal net worth tied up in company stock. 
A) Too little cash is collected relative to reported revenues. 
B) Weaknesses in the cutoff processes or other key accounting processes. 
C) Untrue responses by management to queries about revenue-related accounts. 
D) Executives' personal net worth tied up in company stock.

Question 6

In related-party transactions,fraud occurs when:

Accepted Answer

A) the transactions are not properly disclosed. 
B) assets are transferred between related parties at fair value. 
C) arrangements are made between two parties that create a conflict of interest in a business setting. 
D) the arrangement creates operating revenues. 
A) the transactions are not properly disclosed. 
B) assets are transferred between related parties at fair value. 
C) arrangements are made between two parties that create a conflict of interest in a business setting. 
D) the arrangement creates operating revenues.

Question 7

Working capital turnover ratio indicates:

Accepted Answer

A) the difference between current assets (excluding inventory) and current liabilities. 
B) the amount of working capital used in generating sales for the period. 
C) the bare minimum working capital that a company should have at any time. 
D) the amount of working capital used as a percentage of the assets owned by the company 
A) the difference between current assets (excluding inventory) and current liabilities. 
B) the amount of working capital used in generating sales for the period. 
C) the bare minimum working capital that a company should have at any time. 
D) the amount of working capital used as a percentage of the assets owned by the company

Question 8

Sales return percentage ratio is calculated by:

Accepted Answer

A) dividing sales returns by total sales. 
B) dividing total sales by sales returns. 
C) dividing sales returns by net sales. 
D) dividing net sales by sales returns. 
A) dividing sales returns by total sales. 
B) dividing total sales by sales returns. 
C) dividing sales returns by net sales. 
D) dividing net sales by sales returns.

Question 9

Which of the following is a documentary symptom associated with revenue-related fraud?

Accepted Answer

A) Unusual delays by the entity in providing revenue-related, requested information. 
B) Weaknesses in the cutoff processes or other key accounting processes. 
C) Unsupported or unauthorized revenue-related balances or transactions. 
D) Unusual relationships between two revenue related accounts. 
A) Unusual delays by the entity in providing revenue-related, requested information. 
B) Weaknesses in the cutoff processes or other key accounting processes. 
C) Unsupported or unauthorized revenue-related balances or transactions. 
D) Unusual relationships between two revenue related accounts.

Question 10

Which of the following is most likely an indicator of potential revenue fraud?

Accepted Answer

A) A sudden increase in the sales discount percentage 
B) A high sales return percentage 
C) A rapidly increasing asset turnover ratio 
D) A rapidly decreasing working capital turnover ratio 
A) A sudden increase in the sales discount percentage 
B) A high sales return percentage 
C) A rapidly increasing asset turnover ratio 
D) A rapidly decreasing working capital turnover ratio

Question 11

According to the text,why is the accounts receivable turnover ratio widely used in analyzing revenue-related fraud?

Accepted Answer

A) Significant amounts of fictitious revenues and receivables will almost always affect this ratio except in rare cases. 
B) Adding fictitious receivables will generally decrease the number of days it takes to collect receivables. 
C) If the ratio generally exceeds 1, recording fictitious sales will significantly increase the ratio, making it easy to spot fraud. 
D) Since the ratio should ideally equal to 1, any deviation from this number is easy to detect. 
A) Significant amounts of fictitious revenues and receivables will almost always affect this ratio except in rare cases. 
B) Adding fictitious receivables will generally decrease the number of days it takes to collect receivables. 
C) If the ratio generally exceeds 1, recording fictitious sales will significantly increase the ratio, making it easy to spot fraud. 
D) Since the ratio should ideally equal to 1, any deviation from this number is easy to detect.

Question 12

Which of the following is an analytical symptom associated with revenue-related financial statement frauds?

Accepted Answer

A) Untrue responses by management to queries about revenue-related accounts. 
B) Missing documents in the revenue cycle. 
C) Unusual entries made at the end of the accounting period that increase revenues. 
D) Significant bonuses tied to meeting earnings forecasts. 
A) Untrue responses by management to queries about revenue-related accounts. 
B) Missing documents in the revenue cycle. 
C) Unusual entries made at the end of the accounting period that increase revenues. 
D) Significant bonuses tied to meeting earnings forecasts.

Question 13

Which of the following is a valid reason behind the prevalence of revenue-related financial statement fraud?

Accepted Answer

A) It is easy to manipulate net income using revenues and receivables accounts. 
B) Revenue-related frauds are difficult to hide from detection. 
C) A reversing effect of the fraud automatically occurs in the subsequent period. 
D) Auditors generally focus more on balance sheet items than on revenue accounts. 
A) It is easy to manipulate net income using revenues and receivables accounts. 
B) Revenue-related frauds are difficult to hide from detection. 
C) A reversing effect of the fraud automatically occurs in the subsequent period. 
D) Auditors generally focus more on balance sheet items than on revenue accounts.

Question 14

Which of the following is defined as selling unused assets for a promise to buy them or similar assets back at roughly the same price?

Accepted Answer

A) Bill-and-hold sales 
B) Kiting 
C) Channel stuffing 
D) Round-tripping 
A) Bill-and-hold sales 
B) Kiting 
C) Channel stuffing 
D) Round-tripping

Question 15

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 inventory turnover ratio.

Accepted Answer

A) 2 
B) 0.5 
C) 3.3 
D) 1.3 
A) 2 
B) 0.5 
C) 3.3 
D) 1.3

Question 16

What is often referred to as "abusing the cutoff?"

Accepted Answer

A) Inflating revenues by using implied side agreements. 
B) Inflating revenues by selling unused assets for a promise to buy them or similar assets back at roughly the same price. 
C) Inflating current revenues by allowing customers to return products and cancel sales in future periods. 
D) Inflating revenues by including revenues in the current period that should be recognized in the next period. 
A) Inflating revenues by using implied side agreements. 
B) Inflating revenues by selling unused assets for a promise to buy them or similar assets back at roughly the same price. 
C) Inflating current revenues by allowing customers to return products and cancel sales in future periods. 
D) Inflating revenues by including revenues in the current period that should be recognized in the next period.

Question 17

Which of the following terms depicts processing orders for goods that are stored by the seller,often,because the buyer is not ready or able to receive the goods at the time of the order?

Accepted Answer

A) Sham sales 
B) Side agreements 
C) Consignment sales 
D) Bill-and-hold sales 
A) Sham sales 
B) Side agreements 
C) Consignment sales 
D) Bill-and-hold sales

Question 18

Which of the following depicts the practice that suppliers use to encourage customers to buy extra inventory so as to increase current-year sales?

Accepted Answer

A) Kiting 
B) Channel stuffing 
C) Redating transactions 
D) Partial shipments 
A) Kiting 
B) Channel stuffing 
C) Redating transactions 
D) Partial shipments

Question 19

Given the following information,calculate the gross profit ratio. Particulars
Amount (in $)
Gross sales
$100,000
Sales returns
10,000
COGS
72,000

Accepted Answer

A) 20% 
B) 28% 
C) 18% 
D) 13.33% 
A) 20% 
B) 28% 
C) 18% 
D) 13.33%

Question 20

What is meant by the term "topside" journal entries?

Accepted Answer

A) The entries appearing in the beginning of a general ledger. 
B) The entries that involve the overriding of internal controls. 
C) The entries made toward the end of the accounting period. 
D) The entries posted to subsidiary ledgers where supporting information is maintained. 
A) The entries appearing in the beginning of a general ledger. 
B) The entries that involve the overriding of internal controls. 
C) The entries made toward the end of the accounting period. 
D) The entries posted to subsidiary ledgers where supporting information is maintained.

Which of the following is a potential revenue-related fraud scheme?

Overstating of sales in the income statement leads to:

Which of the following is a rare situation that may arise in a privately owned company that wants to decrease the amount of income taxes paid to the government?

Which of the following is a commonly used ratio to discover inventory-related fraud?

Which of the following is a lifestyle symptom associated with revenue-related fraud?

In related-party transactions,fraud occurs when:

Working capital turnover ratio indicates:

Sales return percentage ratio is calculated by:

Which of the following is a documentary symptom associated with revenue-related fraud?

Which of the following is most likely an indicator of potential revenue fraud?

According to the text,why is the accounts receivable turnover ratio widely used in analyzing revenue-related fraud?

Which of the following is an analytical symptom associated with revenue-related financial statement frauds?

Which of the following is a valid reason behind the prevalence of revenue-related financial statement fraud?

Which of the following is defined as selling unused assets for a promise to buy them or similar assets back at roughly the same price?

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 inventory turnover ratio.

What is often referred to as "abusing the cutoff?"

Which of the following terms depicts processing orders for goods that are stored by the seller,often,because the buyer is not ready or able to receive the goods at the time of the order?

Which of the following depicts the practice that suppliers use to encourage customers to buy extra inventory so as to increase current-year sales?

Given the following information,calculate the gross profit ratio. Particulars Amount (in $) Gross sales $100,000 Sales returns 10,000 COGS 72,000

What is meant by the term "topside" journal entries?

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

Which of the following is a potential revenue-related fraud scheme?

Overstating of sales in the income statement leads to:

Which of the following is a rare situation that may arise in a privately owned company that wants to decrease the amount of income taxes paid to the government?

Which of the following is a commonly used ratio to discover inventory-related fraud?

Which of the following is a lifestyle symptom associated with revenue-related fraud?

In related-party transactions,fraud occurs when:

Working capital turnover ratio indicates:

Sales return percentage ratio is calculated by:

Which of the following is a documentary symptom associated with revenue-related fraud?

Which of the following is most likely an indicator of potential revenue fraud?

According to the text,why is the accounts receivable turnover ratio widely used in analyzing revenue-related fraud?

Which of the following is an analytical symptom associated with revenue-related financial statement frauds?

Which of the following is a valid reason behind the prevalence of revenue-related financial statement fraud?

Which of the following is defined as selling unused assets for a promise to buy them or similar assets back at roughly the same price?

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 inventory turnover ratio.

What is often referred to as "abusing the cutoff?"

Which of the following terms depicts processing orders for goods that are stored by the seller,often,because the buyer is not ready or able to receive the goods at the time of the order?

Which of the following depicts the practice that suppliers use to encourage customers to buy extra inventory so as to increase current-year sales?

Given the following information,calculate the gross profit ratio. Particulars Amount (in $) Gross sales $100,000 Sales returns 10,000 COGS 72,000

What is meant by the term "topside" journal entries?

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