Question 1

Regarding related-party transactions, fraud occurs when:

Accepted Answer

A)  The transactions are not properly disclosed. 
B)  Assets are transferred between related parties. 
C)  Business deals or arrangements are made between two parties that create a conflict of interest in a business setting. 
D)  all of the above 
A)  The transactions are not properly disclosed. 
B)  Assets are transferred between related parties. 
C)  Business deals or arrangements are made between two parties that create a conflict of interest in a business setting. 
D)  all of the above A

Question 2

Which of the following ratios is not commonly used to discover revenue-related analytical fraud symptoms?

Accepted Answer

A)  Asset turnover ratio 
B)  Earnings per share 
C)  Gross profit ratio 
D)  Accounts receivable turnover 
E)  All of the above are commonly used to discover revenue-related analytical fraud symptoms 
A)  Asset turnover ratio 
B)  Earnings per share 
C)  Gross profit ratio 
D)  Accounts receivable turnover 
E)  All of the above are commonly used to discover revenue-related analytical fraud symptoms E

Question 3

Benford's law would most likely assist an auditor when looking for:

Accepted Answer

A)  Analytical symptom 
B)  Accounting symptom 
C)  Control symptom 
D)  Lifestyle symptom 
E)  None of the above 
A)  Analytical symptom 
B)  Accounting symptom 
C)  Control symptom 
D)  Lifestyle symptom 
E)  None of the above B

Question 4

Which of the following is not a fraud scheme affecting the revenue accounts?

Accepted Answer

A)  Related-party transactions 
B)  Side agreements 
C)  Double counting 
D)  Lapping 
A)  Related-party transactions 
B)  Side agreements 
C)  Double counting 
D)  Lapping

Question 5

Common ways of performing "within-statement" analysis include all of the following except:

Accepted Answer

A)  Comparing a firm's account balances from period to period 
B)  Comparing relationships between account balances from period to period 
C)  Comparing financial results with industry averages from period to period 
D)  All of the above are common ways of performing "within-statement" analysis 
A)  Comparing a firm's account balances from period to period 
B)  Comparing relationships between account balances from period to period 
C)  Comparing financial results with industry averages from period to period 
D)  All of the above are common ways of performing "within-statement" analysis

Question 6

Auditors realize that XYZ is experiencing increasing levels of inventory while its competitors' inventory levels remain stable. All of the following are likely explanations except:

Accepted Answer

A)  The increase in inventory is a result of poor management decisions 
B)  The increase in inventory is a result of increased sales expectations 
C)  The increase in inventory is a result of fraud 
D)  All of the above are possible explanations 
A)  The increase in inventory is a result of poor management decisions 
B)  The increase in inventory is a result of increased sales expectations 
C)  The increase in inventory is a result of fraud 
D)  All of the above are possible explanations

Question 7

The practice of ____________ involves selling unused assets while promising to buy them back at roughly the same price

Accepted Answer

A)  Improper cutoff 
B)  Refreshing transactions 
C)  Channel stuffing 
D)  Round-tripping 
E)  None of the above 
A)  Improper cutoff 
B)  Refreshing transactions 
C)  Channel stuffing 
D)  Round-tripping 
E)  None of the above

Question 8

An example of a(n) __________ is a change in behavior to cope with the stress involved with committing fraud.

Accepted Answer

A)  Analytical symptom 
B)  Accounting symptom 
C)  Control symptom 
D)  Lifestyle symptom 
E)  None of the above 
A)  Analytical symptom 
B)  Accounting symptom 
C)  Control symptom 
D)  Lifestyle symptom 
E)  None of the above

Question 9

Revenue-related financial statement fraud is prevalent for all of the following reasons except:

Accepted Answer

A)  There are numerous accounting methods for recognizing revenue. 
B)  Revenue-recognition policies are unlikely to be reviewed by financial statement auditors. 
C)  Net income can be easily manipulated by using revenue accounts. 
D)  Judgment can significantly affect the amount of revenue recognized by an entity. 
A)  There are numerous accounting methods for recognizing revenue. 
B)  Revenue-recognition policies are unlikely to be reviewed by financial statement auditors. 
C)  Net income can be easily manipulated by using revenue accounts. 
D)  Judgment can significantly affect the amount of revenue recognized by an entity.

Question 10

Which of the following are not revenue-related fraud symptoms?

Accepted Answer

A)  Analytical symptoms 
B)  Lifestyle symptoms 
C)  Control symptoms 
D)  Tips and complaints 
E)  All of the above are revenue-related fraud symptoms 
A)  Analytical symptoms 
B)  Lifestyle symptoms 
C)  Control symptoms 
D)  Tips and complaints 
E)  All of the above are revenue-related fraud symptoms

Question 11

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)  Two of the above 
E)  All of the above 
A)  Gross profit ratio 
B)  Inventory turnover ratio 
C)  Number of days sales in inventory 
D)  Two of the above 
E)  All of the above

Question 12

Potential whistle-blowers are hesitant to come forward with information for all of the following reasons except:

Accepted Answer

A)  They don't know who to tell 
B)  They don't feel it's their responsibility 
C)  They don't want to wrongly accuse someone 
D)  They are afraid of "whistle-blower" repercussions 
A)  They don't know who to tell 
B)  They don't feel it's their responsibility 
C)  They don't want to wrongly accuse someone 
D)  They are afraid of "whistle-blower" repercussions

Question 13

Which fraud is most difficult to perpetrate for multiple years?

Accepted Answer

A)  Overstating inventory - because last year's overstatement must be offset in the current year. 
B)  Overstating inventory - because physical assets are easily audited making it easy to detect inventory fraud in the long run 
C)  Overstating revenue - because auditors focus the most attention on revenue recognition 
D)  Overstating revenue - because it is difficult to create fake cash year after year 
A)  Overstating inventory - because last year's overstatement must be offset in the current year. 
B)  Overstating inventory - because physical assets are easily audited making it easy to detect inventory fraud in the long run 
C)  Overstating revenue - because auditors focus the most attention on revenue recognition 
D)  Overstating revenue - because it is difficult to create fake cash year after year

Question 14

Which of the following is not a typical behavioral or verbal symptom of revenue fraud?

Accepted Answer

A)  Inconsistent or vague responses from management arising from revenue inquiries 
B)  Denied access to facilities, employees, or records related to revenue-related audit evidence 
C)  Unusual delays by the entity in providing revenue-related information 
D)  Untrue responses by management to queries about revenue-related accounts 
E)  All of the above are typical symptoms 
A)  Inconsistent or vague responses from management arising from revenue inquiries 
B)  Denied access to facilities, employees, or records related to revenue-related audit evidence 
C)  Unusual delays by the entity in providing revenue-related information 
D)  Untrue responses by management to queries about revenue-related accounts 
E)  All of the above are typical symptoms

Question 15

Under SAS 99, financial statement auditors are required to make inquires of all of the following individuals or groups about possible fraudulent activity or red flags except:

Accepted Answer

A)  Management 
B)  Audit committee members 
C)  Internal audit personnel 
D)  Financial statement auditors must make inquiries of all of the above 
A)  Management 
B)  Audit committee members 
C)  Internal audit personnel 
D)  Financial statement auditors must make inquiries of all of the above

Question 16

Which of the following is necessary in order to determine if an analytical symptom exists?

Accepted Answer

A)  Ratio analysis 
B)  A change statement 
C)  Vertical analysis 
D)  An expectation 
A)  Ratio analysis 
B)  A change statement 
C)  Vertical analysis 
D)  An expectation

Question 17

Which of the following is not a typical symptom of revenue fraud?

Accepted Answer

A)  managers and other company officers are living a lavish lifestyle 
B)  management overrides significant internal control activities related to the revenue cycle 
C)  revenue-related ledgers do not balance 
D)  the company has numerous large customers 
A)  managers and other company officers are living a lavish lifestyle 
B)  management overrides significant internal control activities related to the revenue cycle 
C)  revenue-related ledgers do not balance 
D)  the company has numerous large customers

Question 18

Which of the following is false concerning "topside" journal entries used to commit financial statement fraud?

Accepted Answer

A)  Upper management usually records the journal entry 
B)  Entries are recorded directly to the subsidiary ledger 
C)  The journal entry may be recorded after normal business hours. 
D)  All of the above are false 
A)  Upper management usually records the journal entry 
B)  Entries are recorded directly to the subsidiary ledger 
C)  The journal entry may be recorded after normal business hours. 
D)  All of the above are false

Question 19

___________ is a 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 20

Possible methods of determining whether inventory is properly valued are:

Accepted Answer

A)  talking to the workers who handle the inventory 
B)  communicating with vendors about inventory costs 
C)  speaking with large customers about inventory quality and product returns 
D)  all of the above 
A)  talking to the workers who handle the inventory 
B)  communicating with vendors about inventory costs 
C)  speaking with large customers about inventory quality and product returns 
D)  all of the above

Regarding related-party transactions, fraud occurs when:

Which of the following ratios is not commonly used to discover revenue-related analytical fraud symptoms?

Benford's law would most likely assist an auditor when looking for:

Which of the following is not a fraud scheme affecting the revenue accounts?

Common ways of performing "within-statement" analysis include all of the following except:

Auditors realize that XYZ is experiencing increasing levels of inventory while its competitors' inventory levels remain stable. All of the following are likely explanations except:

The practice of ____________ involves selling unused assets while promising to buy them back at roughly the same price

An example of a(n) __________ is a change in behavior to cope with the stress involved with committing fraud.

Revenue-related financial statement fraud is prevalent for all of the following reasons except:

Which of the following are not revenue-related fraud symptoms?

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

Potential whistle-blowers are hesitant to come forward with information for all of the following reasons except:

Which fraud is most difficult to perpetrate for multiple years?

Which of the following is not a typical behavioral or verbal symptom of revenue fraud?

Under SAS 99, financial statement auditors are required to make inquires of all of the following individuals or groups about possible fraudulent activity or red flags except:

Which of the following is necessary in order to determine if an analytical symptom exists?

Which of the following is not a typical symptom of revenue fraud?

Which of the following is false concerning "topside" journal entries used to commit financial statement fraud?

___________ is a practice that suppliers use to encourage customers to buy extra inventory so as to increase current-year sales.

Possible methods of determining whether inventory is properly valued are:

The Nature of Fraud

Why People Commit Fraud

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

Fraud in E-Commerce

Legal Follow-Up

Filters

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

Regarding related-party transactions, fraud occurs when:

Which of the following ratios is not commonly used to discover revenue-related analytical fraud symptoms?

Benford's law would most likely assist an auditor when looking for:

Which of the following is not a fraud scheme affecting the revenue accounts?

Common ways of performing "within-statement" analysis include all of the following except:

Auditors realize that XYZ is experiencing increasing levels of inventory while its competitors' inventory levels remain stable. All of the following are likely explanations except:

The practice of ____________ involves selling unused assets while promising to buy them back at roughly the same price

An example of a(n) __________ is a change in behavior to cope with the stress involved with committing fraud.

Revenue-related financial statement fraud is prevalent for all of the following reasons except:

Which of the following are not revenue-related fraud symptoms?

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

Potential whistle-blowers are hesitant to come forward with information for all of the following reasons except:

Which fraud is most difficult to perpetrate for multiple years?

Which of the following is not a typical behavioral or verbal symptom of revenue fraud?

Under SAS 99, financial statement auditors are required to make inquires of all of the following individuals or groups about possible fraudulent activity or red flags except:

Which of the following is necessary in order to determine if an analytical symptom exists?

Which of the following is not a typical symptom of revenue fraud?

Which of the following is false concerning "topside" journal entries used to commit financial statement fraud?

___________ is a practice that suppliers use to encourage customers to buy extra inventory so as to increase current-year sales.

Possible methods of determining whether inventory is properly valued are:

The Nature of Fraud

Why People Commit Fraud

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

Fraud in E-Commerce

Legal Follow-Up

Filters