Question 1

Which of the following statements is FALSE?

Accepted Answer

A) Liability understatements are easier to detect than other types of financial statement fraud. 
B) Analytical symptoms related to accounts payable understatements usually relate to reported balances that appear too low. 
C) A seasoned fraud examiner will look for unusual liability account changes to detect fraud. 
D) Companies in trouble have a strong motivation to understate liabilities. 
A) Liability understatements are easier to detect than other types of financial statement fraud. 
B) Analytical symptoms related to accounts payable understatements usually relate to reported balances that appear too low. 
C) A seasoned fraud examiner will look for unusual liability account changes to detect fraud. 
D) Companies in trouble have a strong motivation to understate liabilities. A

Question 2

Disclosure frauds occur through misrepresentations about the company or through what other intentional act​?

Accepted Answer

A) ​omissions in the footnotes to the financial statements 
B) ​falsely increasing sales 
C) ​creating off-balance sheet accounts 
D) ​conducting related-party transactions 
A) ​omissions in the footnotes to the financial statements 
B) ​falsely increasing sales 
C) ​creating off-balance sheet accounts 
D) ​conducting related-party transactions A

Question 3

Which of the following is least important when concerned about overstatement of assets through a merger?

Accepted Answer

A) Understanding the general context of the merger 
B) Identifying specific analytical or documentary symptoms 
C) Determining if the merger was done in accordance with GAAP 
D) Studying the nature of the companies involved 
A) Understanding the general context of the merger 
B) Identifying specific analytical or documentary symptoms 
C) Determining if the merger was done in accordance with GAAP 
D) Studying the nature of the companies involved B

Question 4

A form 1099 with no withholdings,where withholdings should exist,may be a fraud symptom for which liability account?

Accepted Answer

A) Accounts payable 
B) Unearned revenues 
C) Contingent liabilities 
D) Accrued liabilities 
A) Accounts payable 
B) Unearned revenues 
C) Contingent liabilities 
D) Accrued liabilities

Question 5

It is usually easier to detect inadequate disclosure fraud that involves______ disclosures?than it is to detect disclosure fraud that involves _______ disclosures.

Accepted Answer

A) fraudulent, irrelevant 
B) unintentional; intentional 
C) misleading; missing 
D) missing; fraudulent 
A) fraudulent, irrelevant 
B) unintentional; intentional 
C) misleading; missing 
D) missing; fraudulent

Question 6

What is the effect on the Cost of Goods Sold account when the Inventory account is overstated?

Accepted Answer

A) It is overstated. 
B) It is not affected. 
C) It is increased disproportionately. 
D) It is understated. 
A) It is overstated. 
B) It is not affected. 
C) It is increased disproportionately. 
D) It is understated.

Question 7

Which of the following will NOT understate liabilities?

Accepted Answer

A) Understate accounts payable 
B) Understate accrued liabilities 
C) Recognize earned revenue as unearned revenue 
D) Underrecord future obligations 
A) Understate accounts payable 
B) Understate accrued liabilities 
C) Recognize earned revenue as unearned revenue 
D) Underrecord future obligations

Question 8

Which ratio will increase when accounts payable is not recorded?

Accepted Answer

A) Accounts payable/Inventory 
B) Quick assets/Current liabilities 
C) Accounts payable/COGS 
D) Accounts payable/Total liabilities 
A) Accounts payable/Inventory 
B) Quick assets/Current liabilities 
C) Accounts payable/COGS 
D) Accounts payable/Total liabilities

Question 9

Which of the following is NOT a symptom of liability fraud?

Accepted Answer

A) A sudden decrease in accounts payable/inventory ratio. 
B) Inappropriately capitalizing costs that should be expensed. 
C) An unusual increase in current ratio. 
D) Record payments made in later periods as being paid in earlier periods. 
A) A sudden decrease in accounts payable/inventory ratio. 
B) Inappropriately capitalizing costs that should be expensed. 
C) An unusual increase in current ratio. 
D) Record payments made in later periods as being paid in earlier periods.

Question 10

In dealing with capitalized costs,what should be done when deferred charges of interest exist on the balance sheet?

Accepted Answer

A) Assume them as accurately capitalized 
B) Consider them candidates for fraud 
C) Look for ways to research the issue 
D) Nothing should be done, as they are perfectly normal on the balance sheet 
A) Assume them as accurately capitalized 
B) Consider them candidates for fraud 
C) Look for ways to research the issue 
D) Nothing should be done, as they are perfectly normal on the balance sheet

Question 11

Recognizing unearned revenue as earned revenue is an example of which type of fraud?

Accepted Answer

A) Liability understatement 
B) Revenue understatement 
C) Cost of goods sold understatement 
D) Assets overstatement 
A) Liability understatement 
B) Revenue understatement 
C) Cost of goods sold understatement 
D) Assets overstatement

Question 12

In liability fraud,liabilities are most often:

Accepted Answer

A) understated. 
B) overstated. 
C) recorded as assets. 
D) recorded as expenses. 
A) understated. 
B) overstated. 
C) recorded as assets. 
D) recorded as expenses.

Question 13

In asset fraud,assets are most often:

Accepted Answer

A) understated. 
B) overstated. 
C) recorded as liabilities. 
D) recorded as revenues. 
A) understated. 
B) overstated. 
C) recorded as liabilities. 
D) recorded as revenues.

Question 14

No mention of the contingent liability needs to be made in the financial statements,if the probability of payment is _____.

Accepted Answer

A) "remote" 
B) "probable" 
C) "reasonable possible" 
D) "not plausible" 
A) "remote" 
B) "probable" 
C) "reasonable possible" 
D) "not plausible"

Question 15

Which ratio should be examined while analyzing the balance sheet to detect underrecording of accounts payable?

Accepted Answer

A) Long-term debt/Stockholder's equity 
B) Warranty expense/Sales 
C) Current assets/Current liabilities 
D) Various accrual/Related expenses 
A) Long-term debt/Stockholder's equity 
B) Warranty expense/Sales 
C) Current assets/Current liabilities 
D) Various accrual/Related expenses

Question 16

You observe that a company's current ratio has increased significantly.This could indicate that:

Accepted Answer

A) contingent liabilities are not recorded. 
B) accounts payable is understated. 
C) expenses are inappropriately capitalized as assets. 
D) fixed assets are overstated. 
A) contingent liabilities are not recorded. 
B) accounts payable is understated. 
C) expenses are inappropriately capitalized as assets. 
D) fixed assets are overstated.

Question 17

Which of the following items listed provide the best opportunity to find contingent liabilities that should be recorded.

Accepted Answer

A) Tips and complaints 
B) Lifestyle symptoms 
C) Documentary symptoms 
D) Analytical symptoms 
A) Tips and complaints 
B) Lifestyle symptoms 
C) Documentary symptoms 
D) Analytical symptoms

Question 18

Which method is NOT used to overstate assets?

Accepted Answer

A) Inappropriately capitalizing costs that should be expensed. 
B) Recording newly acquired assets at cost instead of fair market value in a healthy economy. 
C) Creating ficticious accounts receivable or inventory to hide thefts. 
D) Inflating assets through mergers and acquisitions by manipulation of intercompany accounts and transactions. 
A) Inappropriately capitalizing costs that should be expensed. 
B) Recording newly acquired assets at cost instead of fair market value in a healthy economy. 
C) Creating ficticious accounts receivable or inventory to hide thefts. 
D) Inflating assets through mergers and acquisitions by manipulation of intercompany accounts and transactions.

Question 19

Which of the following expenditures would be most suspicious if it were capitalized?

Accepted Answer

A) Equipment purchases 
B) Computer purchases 
C) Prepaid expenses 
D) Salaries to the top management 
A) Equipment purchases 
B) Computer purchases 
C) Prepaid expenses 
D) Salaries to the top management

Question 20

Which asset is probably the most difficult to overstate under normal audit procedures?

Accepted Answer

A) Fixed assets 
B) Marketable securities 
C) Cash 
D) Accounts receivable 
A) Fixed assets 
B) Marketable securities 
C) Cash 
D) Accounts receivable

Which of the following statements is FALSE?

Disclosure frauds occur through misrepresentations about the company or through what other intentional act?

Which of the following is least important when concerned about overstatement of assets through a merger?

A form 1099 with no withholdings,where withholdings should exist,may be a fraud symptom for which liability account?

It is usually easier to detect inadequate disclosure fraud that involves disclosures?than it is to detect disclosure fraud that involves _ disclosures.

What is the effect on the Cost of Goods Sold account when the Inventory account is overstated?

Which of the following will NOT understate liabilities?

Which ratio will increase when accounts payable is not recorded?

Which of the following is NOT a symptom of liability fraud?

In dealing with capitalized costs,what should be done when deferred charges of interest exist on the balance sheet?

Recognizing unearned revenue as earned revenue is an example of which type of fraud?

In liability fraud,liabilities are most often:

In asset fraud,assets are most often:

No mention of the contingent liability needs to be made in the financial statements,if the probability of payment is _____.

Which ratio should be examined while analyzing the balance sheet to detect underrecording of accounts payable?

You observe that a company's current ratio has increased significantly.This could indicate that:

Which of the following items listed provide the best opportunity to find contingent liabilities that should be recorded.

Which method is NOT used to overstate assets?

Which of the following expenditures would be most suspicious if it were capitalized?

Which asset is probably the most difficult to overstate under normal audit procedures?

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

Revenue- and Inventory-Related Financial Statement Frauds

Fraud Against Organizations

Consumer Fraud

Bankruptcy, divorce, and Tax Fraud

E-Commerce Fraud

Legal Follow-Up

Filters

Exam 13: Liability, asset, and Inadequate Disclosure Frauds

Which of the following statements is FALSE?

Disclosure frauds occur through misrepresentations about the company or through what other intentional act​?

Which of the following is least important when concerned about overstatement of assets through a merger?

A form 1099 with no withholdings,where withholdings should exist,may be a fraud symptom for which liability account?

It is usually easier to detect inadequate disclosure fraud that involves______ disclosures?than it is to detect disclosure fraud that involves _______ disclosures.

What is the effect on the Cost of Goods Sold account when the Inventory account is overstated?

Which of the following will NOT understate liabilities?

Which ratio will increase when accounts payable is not recorded?

Which of the following is NOT a symptom of liability fraud?

In dealing with capitalized costs,what should be done when deferred charges of interest exist on the balance sheet?

Recognizing unearned revenue as earned revenue is an example of which type of fraud?

In liability fraud,liabilities are most often:

In asset fraud,assets are most often:

No mention of the contingent liability needs to be made in the financial statements,if the probability of payment is _____.

Which ratio should be examined while analyzing the balance sheet to detect underrecording of accounts payable?

You observe that a company's current ratio has increased significantly.This could indicate that:

Which of the following items listed provide the best opportunity to find contingent liabilities that should be recorded.

Which method is NOT used to overstate assets?

Which of the following expenditures would be most suspicious if it were capitalized?

Which asset is probably the most difficult to overstate under normal audit procedures?

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

Revenue- and Inventory-Related Financial Statement Frauds

Fraud Against Organizations

Consumer Fraud

Bankruptcy, divorce, and Tax Fraud

E-Commerce Fraud

Legal Follow-Up

Filters

Disclosure frauds occur through misrepresentations about the company or through what other intentional act?

It is usually easier to detect inadequate disclosure fraud that involves disclosures?than it is to detect disclosure fraud that involves _ disclosures.