Question 1

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. B

Question 2

All of the following are indicators of financial statement fraud EXCEPT:

Accepted Answer

A) Companies with unrealistically large growth in assets,revenues or profits. 
B) Companies with a principal who has been involved in a bankruptcy. 
C) Companies whose success depends on a special tax loophole or tax avoidance scheme. 
D) Companies that report contingent liabilities that have the potential to create a loss. 
A) Companies with unrealistically large growth in assets,revenues or profits. 
B) Companies with a principal who has been involved in a bankruptcy. 
C) Companies whose success depends on a special tax loophole or tax avoidance scheme. 
D) Companies that report contingent liabilities that have the potential to create a loss. D

Question 3

With liability fraud,which of the following is most likely to occur?

Accepted Answer

A) Liabilities will be overstated 
B) Balances in general that relate to this fraud will tend to be low 
C) Items will be expensed rather than capitalized 
D) Net income will be understated 
A) Liabilities will be overstated 
B) Balances in general that relate to this fraud will tend to be low 
C) Items will be expensed rather than capitalized 
D) Net income will be understated B

Question 4

When examining whether a company has underrecorded accounts payable,all of the following ratios are helpful EXCEPT:

Accepted Answer

A) Quick assets ¸ Current liabilities 
B) Accounts payable ¸ Purchases 
C) Accounts payable ¸ Cost of goods sold 
D) Unearned revenue ¸ Accounts payable 
A) Quick assets ¸ Current liabilities 
B) Accounts payable ¸ Purchases 
C) Accounts payable ¸ Cost of goods sold 
D) Unearned revenue ¸ Accounts payable

Question 5

Analytical symptoms for unrecorded notes and mortgages payable include which of the following?

Accepted Answer

A) Significant increases in recorded debt 
B) Unreasonable relationships between interest expense and recorded liabilities 
C) Recorded amounts of notes payable,mortgages payable,and other debts that appear to be too high 
D) Significant sales of assets with not much cash flow 
A) Significant increases in recorded debt 
B) Unreasonable relationships between interest expense and recorded liabilities 
C) Recorded amounts of notes payable,mortgages payable,and other debts that appear to be too high 
D) Significant sales of assets with not much cash flow

Question 6

Which of the following is an example of liability fraud?

Accepted Answer

A) Underrecording accounts payable 
B) Improperly capitalizing costs 
C) Overstating accounts receivable 
D) Recording fictitious sales 
A) Underrecording accounts payable 
B) Improperly capitalizing costs 
C) Overstating accounts receivable 
D) Recording fictitious sales

Question 7

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 8

Contingent liabilities should be recorded as liabilities on the balance sheet if the likelihood of loss or payment is "probable." If likelihood of loss is reasonably possible,_____.

Accepted Answer

A) the liability may or may not be recorded in the footnotes to financial statements 
B) the contingent liability should be disclosed in the footnotes to the financial statements 
C) the liability should be disclosed in the footnotes as well as on the face of the financial statements. 
D) no mention of the liability needs to be made in the financial statements 
A) the liability may or may not be recorded in the footnotes to financial statements 
B) the contingent liability should be disclosed in the footnotes to the financial statements 
C) the liability should be disclosed in the footnotes as well as on the face of the financial statements. 
D) no mention of the liability needs to be made in the financial statements

Question 9

Which of the following observations is NOT true with respect to analytical symptoms?

Accepted Answer

A) It relates to what the size of the deferred charges are on the balance sheet relative to prior periods. 
B) With analytical symptoms,you are comparing trends and changes. 
C) To discover an inadequate disclosure fraud,a person must look for analytical symptoms. 
D) Proactive searching for analytical symptoms means that we are searching for accounts that are unusual in some way. 
A) It relates to what the size of the deferred charges are on the balance sheet relative to prior periods. 
B) With analytical symptoms,you are comparing trends and changes. 
C) To discover an inadequate disclosure fraud,a person must look for analytical symptoms. 
D) Proactive searching for analytical symptoms means that we are searching for accounts that are unusual in some way.

Question 10

In case of deferred revenue liabilities,revenues should almost always be recorded as earned when:

Accepted Answer

A) the company receives an order for delivery of the product or the performance of a service. 
B) the company is reasonably sure that the product can be developed and delivered. 
C) the service is performed or the product is shipped. 
D) the company receives cash for the service to be performed or the product to be delivered. 
A) the company receives an order for delivery of the product or the performance of a service. 
B) the company is reasonably sure that the product can be developed and delivered. 
C) the service is performed or the product is shipped. 
D) the company receives cash for the service to be performed or the product to be delivered.

Question 11

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 12

What is the easiest way to identify understatement of liability fraud exposures?

Accepted Answer

A) Analyze the trend of accounts payable for the company. 
B) By using the formula,assets = capital + liabilities. 
C) Identify the various transactions that involve liabilities and can be understated. 
D) Compare the company's liabilities with those of other players in the industry. 
A) Analyze the trend of accounts payable for the company. 
B) By using the formula,assets = capital + liabilities. 
C) Identify the various transactions that involve liabilities and can be understated. 
D) Compare the company's liabilities with those of other players in the industry.

Question 13

When accounts receivable are overstated,revenues are overstated.Similarly,when inventory is overstated,cost of goods sold is usually _________.

Accepted Answer

A) overstated 
B) unchanged 
C) inadequate 
D) understated 
A) overstated 
B) unchanged 
C) inadequate 
D) understated

Question 14

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 15

Which of the following is a documentary symptom that relate to all kinds of understatement of liability fraud?

Accepted Answer

A) Transactions recorded in a complete or timely manner. 
B) Reconciliation statement on unexplained items. 
C) Unusual discrepancies between the entity's records and confirmation replies. 
D) Balances or transactions that have supporting documents. 
A) Transactions recorded in a complete or timely manner. 
B) Reconciliation statement on unexplained items. 
C) Unusual discrepancies between the entity's records and confirmation replies. 
D) Balances or transactions that have supporting documents.

Question 16

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 17

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.

Question 18

______ 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 19

Special purpose entities are now called _____ by the Financial Accounting Standards Board.

Accepted Answer

A) variable interest entities 
B) off-balance-sheet entities 
C) structured finance entities 
D) risk mitigation vehicles 
A) variable interest entities 
B) off-balance-sheet entities 
C) structured finance entities 
D) risk mitigation vehicles

Question 20

What are pension liabilities?

Accepted Answer

A) Future liabilities resulting from pension commitments made by a corporation. 
B) Unreasonable relationships between interest expense and recorded liabilities. 
C) Liabilities that can be used to fraudulently misstate financial statements by underestimating the probability of occurrence. 
D) A fund that is established for the payment of retirement benefits by the insurance company. 
A) Future liabilities resulting from pension commitments made by a corporation. 
B) Unreasonable relationships between interest expense and recorded liabilities. 
C) Liabilities that can be used to fraudulently misstate financial statements by underestimating the probability of occurrence. 
D) A fund that is established for the payment of retirement benefits by the insurance company.

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

All of the following are indicators of financial statement fraud EXCEPT:

With liability fraud,which of the following is most likely to occur?

When examining whether a company has underrecorded accounts payable,all of the following ratios are helpful EXCEPT:

Analytical symptoms for unrecorded notes and mortgages payable include which of the following?

Which of the following is an example of liability fraud?

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

Contingent liabilities should be recorded as liabilities on the balance sheet if the likelihood of loss or payment is "probable." If likelihood of loss is reasonably possible,_____.

Which of the following observations is NOT true with respect to analytical symptoms?

In case of deferred revenue liabilities,revenues should almost always be recorded as earned when:

Which ratio will increase when accounts payable is not recorded?

What is the easiest way to identify understatement of liability fraud exposures?

When accounts receivable are overstated,revenues are overstated.Similarly,when inventory is overstated,cost of goods sold is usually _________.

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

Which of the following is a documentary symptom that relate to all kinds of understatement of liability fraud?

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

Which of the following statements is FALSE?

______ provide the best opportunity to find contingent liabilities that should be recorded.

Special purpose entities are now called _____ by the Financial Accounting Standards Board.

What are pension liabilities?

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

Revenue- and Inventory-Related Financial Statement Frauds

Fraud Against Organizations

Consumer Fraud

Bankruptcy, divorce, and Tax Fraud

Fraud in E-Commerce

Legal Follow-Up

Filters

Exam 13: Liability,asset,and Inadequate Disclosure Frauds

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

All of the following are indicators of financial statement fraud EXCEPT:

With liability fraud,which of the following is most likely to occur?

When examining whether a company has underrecorded accounts payable,all of the following ratios are helpful EXCEPT:

Analytical symptoms for unrecorded notes and mortgages payable include which of the following?

Which of the following is an example of liability fraud?

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

Contingent liabilities should be recorded as liabilities on the balance sheet if the likelihood of loss or payment is "probable." If likelihood of loss is reasonably possible,_____.

Which of the following observations is NOT true with respect to analytical symptoms?

In case of deferred revenue liabilities,revenues should almost always be recorded as earned when:

Which ratio will increase when accounts payable is not recorded?

What is the easiest way to identify understatement of liability fraud exposures?

When accounts receivable are overstated,revenues are overstated.Similarly,when inventory is overstated,cost of goods sold is usually _________.

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

Which of the following is a documentary symptom that relate to all kinds of understatement of liability fraud?

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

Which of the following statements is FALSE?

______ provide the best opportunity to find contingent liabilities that should be recorded.

Special purpose entities are now called _____ by the Financial Accounting Standards Board.

What are pension liabilities?

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

Revenue- and Inventory-Related Financial Statement Frauds

Fraud Against Organizations

Consumer Fraud

Bankruptcy, divorce, and Tax Fraud

Fraud in E-Commerce

Legal Follow-Up

Filters