Question 1

According to the text, what is the unique reason that the accounts receivable turnover ratio is so widely used in analyzing revenue?

Accepted Answer

A)  significant revenues and receivables will almost always affect this ratio 
B)  it is easy to compute 
C)  the data is readily available 
D)  the accounts receivable turnover ratio is not a widely used ratio in analyzing revenue 
A)  significant revenues and receivables will almost always affect this ratio 
B)  it is easy to compute 
C)  the data is readily available 
D)  the accounts receivable turnover ratio is not a widely used ratio in analyzing revenue

Question 2

Which of the following is most likely to be indicative of a potential inventory fraud?

Accepted Answer

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

Question 3

According to a COSO-sponsored study, most companies committing financial statement fraud had all of the following characteristics except:

Accepted Answer

A)  The companies were large 
B)  The companies had inactive audit committees 
C)  The companies had family members among directors or officers 
D)  all of the above 
A)  The companies were large 
B)  The companies had inactive audit committees 
C)  The companies had family members among directors or officers 
D)  all of the above

Question 4

Which of the following is an analytical symptom?

Accepted Answer

A)  Sales returns appear too high 
B)  Accounts receivable appear too low 
C)  Significant new, unknown customers 
D)  Two of the above 
E)  All of the above 
A)  Sales returns appear too high 
B)  Accounts receivable appear too low 
C)  Significant new, unknown customers 
D)  Two of the above 
E)  All of the above

Question 5

__________ involves examining percentage changes in account balances from period to period.

Accepted Answer

A)  Horizontal analysis 
B)  Change statement analysis 
C)  Ratio analysis 
D)  None of the above 
A)  Horizontal analysis 
B)  Change statement analysis 
C)  Ratio analysis 
D)  None of the above

Question 6

_________ are 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 
E)  Related party transactions 
A)  Sham sales 
B)  Side agreements 
C)  Consignment sales 
D)  Bill and hold sales 
E)  Related party transactions

Question 7

The first task to understanding how fraud can be perpetrated in a company is to:

Accepted Answer

A)  Determine how each transaction could be misstated 
B)  Evaluate the integrity of management 
C)  Analyze and diagram the various transactions between an organization and its customers. 
D)  Interview employees throughout the company 
A)  Determine how each transaction could be misstated 
B)  Evaluate the integrity of management 
C)  Analyze and diagram the various transactions between an organization and its customers. 
D)  Interview employees throughout the company

Question 8

Which of the following is not a common inventory-related fraud scheme?

Accepted Answer

A)  Capitalizing costs that should be expensed 
B)  Cutoff problems 
C)  Consigned inventory 
D)  All of the above are inventory-related fraud schemes 
A)  Capitalizing costs that should be expensed 
B)  Cutoff problems 
C)  Consigned inventory 
D)  All of the above are inventory-related fraud schemes

Question 9

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 10

Which of the following fraud symptoms is least helpful in detecting and often not relevant in financial statement fraud in large organizations?

Accepted Answer

A)  Behavioral or verbal flags 
B)  Tips and complaints 
C)  Extravagant lifestyles 
D)  Analytical symptoms 
A)  Behavioral or verbal flags 
B)  Tips and complaints 
C)  Extravagant lifestyles 
D)  Analytical symptoms

Question 11

Which accounts are most commonly manipulated in a financial statement fraud?

Accepted Answer

A)  Revenues/ receivables 
B)  Inventory/ COGS 
C)  Long-term liabilities 
D)  Short-term liabilities 
A)  Revenues/ receivables 
B)  Inventory/ COGS 
C)  Long-term liabilities 
D)  Short-term liabilities

Question 12

Overstating ending inventory has the following effect on cost of goods sold and net income, respectively.

Accepted Answer

A)  Overstated, overstated 
B)  Understated, overstated 
C)  Overstated, understated 
D)  No effect on either account 
A)  Overstated, overstated 
B)  Understated, overstated 
C)  Overstated, understated 
D)  No effect on either account

Question 13

Which of the following is most likely to be indicative of a 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 14

An example of a(n) __________ is a lack of segregation of duties:

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 15

When might a fraud scheme be used to understate revenue and net income?

Accepted Answer

A)  In order to manage or smooth income 
B)  To allow a company to pay lower income taxes 
C)  To improve key financial statement ratios 
D)  Two of the above 
E)  All of the above 
A)  In order to manage or smooth income 
B)  To allow a company to pay lower income taxes 
C)  To improve key financial statement ratios 
D)  Two of the above 
E)  All of the above

Question 16

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

Accepted Answer

A)  Revenue appears too high 
B)  Discounts appear too low 
C)  Allowance for doubtful accounts appears too high 
D)  Bad debt expense appears too low 
E)  All of the above are typical analytical symptoms of revenue fraud 
A)  Revenue appears too high 
B)  Discounts appear too low 
C)  Allowance for doubtful accounts appears too high 
D)  Bad debt expense appears too low 
E)  All of the above are typical analytical symptoms of revenue fraud

Question 17

When the sales return ratio becomes unexpectedly ______, it is a signal that fraud or other problems could be occurring.

Accepted Answer

A)  Low 
B)  High 
A)  Low 
B)  High

Question 18

According to a study sponsored by The Committee of Sponsoring Organizations (COSO), the most common way to manipulate revenue accounts is by:

Accepted Answer

A)  Reclassifying expenses as revenues 
B)  Recording fictitious revenues 
C)  Inappropriately reducing sales returns and allowances 
D)  Prematurely recording revenue 
A)  Reclassifying expenses as revenues 
B)  Recording fictitious revenues 
C)  Inappropriately reducing sales returns and allowances 
D)  Prematurely recording revenue

Question 19

Which of the following are ways to proactively search for fraud symptoms?

Accepted Answer

A)  Responding to customer complaints regarding sales terms. 
B)  Investigating anomalies noticed when sampling transactions for routine control testing. 
C)  Exploring claims of a disgruntled employee that were received in an exit interview. 
D)  None of the above. 
A)  Responding to customer complaints regarding sales terms. 
B)  Investigating anomalies noticed when sampling transactions for routine control testing. 
C)  Exploring claims of a disgruntled employee that were received in an exit interview. 
D)  None of the above.

Question 20

Revenues and receivables can be manipulated by:

Accepted Answer

A)  Fictitious sales 
B)  Topside journal entries 
C)  Misstating work completed on a long-term construction contract 
D)  Two of the above 
E)  All of the above 
A)  Fictitious sales 
B)  Topside journal entries 
C)  Misstating work completed on a long-term construction contract 
D)  Two of the above 
E)  All of the above

According to the text, what is the unique reason that the accounts receivable turnover ratio is so widely used in analyzing revenue?

Which of the following is most likely to be indicative of a potential inventory fraud?

According to a COSO-sponsored study, most companies committing financial statement fraud had all of the following characteristics except:

Which of the following is an analytical symptom?

__________ involves examining percentage changes in account balances from period to period.

_________ are 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.

The first task to understanding how fraud can be perpetrated in a company is to:

Which of the following is not a common inventory-related fraud scheme?

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

Which of the following fraud symptoms is least helpful in detecting and often not relevant in financial statement fraud in large organizations?

Which accounts are most commonly manipulated in a financial statement fraud?

Overstating ending inventory has the following effect on cost of goods sold and net income, respectively.

Which of the following is most likely to be indicative of a potential revenue fraud?

An example of a(n) __________ is a lack of segregation of duties:

When might a fraud scheme be used to understate revenue and net income?

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

When the sales return ratio becomes unexpectedly ______, it is a signal that fraud or other problems could be occurring.

According to a study sponsored by The Committee of Sponsoring Organizations (COSO), the most common way to manipulate revenue accounts is by:

Which of the following are ways to proactively search for fraud symptoms?

Revenues and receivables can be manipulated by:

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

According to the text, what is the unique reason that the accounts receivable turnover ratio is so widely used in analyzing revenue?

Which of the following is most likely to be indicative of a potential inventory fraud?

According to a COSO-sponsored study, most companies committing financial statement fraud had all of the following characteristics except:

Which of the following is an analytical symptom?

__________ involves examining percentage changes in account balances from period to period.

_________ are 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.

The first task to understanding how fraud can be perpetrated in a company is to:

Which of the following is not a common inventory-related fraud scheme?

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

Which of the following fraud symptoms is least helpful in detecting and often not relevant in financial statement fraud in large organizations?

Which accounts are most commonly manipulated in a financial statement fraud?

Overstating ending inventory has the following effect on cost of goods sold and net income, respectively.

Which of the following is most likely to be indicative of a potential revenue fraud?

An example of a(n) __________ is a lack of segregation of duties:

When might a fraud scheme be used to understate revenue and net income?

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

When the sales return ratio becomes unexpectedly ______, it is a signal that fraud or other problems could be occurring.

According to a study sponsored by The Committee of Sponsoring Organizations (COSO), the most common way to manipulate revenue accounts is by:

Which of the following are ways to proactively search for fraud symptoms?

Revenues and receivables can be manipulated by:

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