Question: A form 1099 with missing withholdings (where they should be reported) may be a fraud symptom for which liability account?
Answer Choices:
A. Accounts payable
\nB. Unearned revenues
\nC. Contingent liabilities
\nD. Accrued liabilities
Answer: D
Question: Which of the following is an example of liability fraud?
Answer Choices:
A. Underrecording accounts payable
\nB. Improperly capitalizing costs
\nC. Overstating accounts receivable
\nD. Recording fictitious sales
Answer: A
Question: Which of the following factors generally results in a high-fraud environment?
Answer Choices:
A. Hiring honest people
\nB. Providing an EAP
\nC. Autocratic management
\nD. Both A and B
Answer: C
Question: People will often be dishonest if they are placed in an environment with
Answer Choices:
A. Poor controls
\nB. High pressure
\nC. Low integrity
\nD. Loose accountability
\nE. All of the above
Answer: E
Question: Of the following, the most difficult account for management to intentionally misstate is
Answer Choices:
A. Income taxes payable
\nB. Cash
\nC. Securities
\nD. Prepaid expenses
Answer: B
Question: Which of the following is a commonly used ratio to discover inventory-related fraud?
Answer Choices:
A. Number of days’ in receivable ratio
\nB. Sales return percentage ratio
\nC. Gross profit ratio
\nD. Earnings per share
Answer: C
Question: Which of the following is not an inventory-related documentary symptom?
Answer Choices:
A. Duplicate purchase orders
\nB. Missing inventory during inventory counts
\nC. Unsupported inventory sales transactions
\nD. All of the above are inventory-related documentary symptoms
Answer: C
Question: Which of the following is a potential revenue-related fraud scheme?
Answer Choices:
A. Cutoff problems
\nB. Double counting
\nC. Holding items on consignment
\nD. Partial shipment
\nE. All of the above
Answer: E
Question: Which of the following is NOT one of the three aspects of management that a fraud examiner needs to be aware of?
Answer Choices:
A. Their background
\nB. Their motivations
\nC. Their religious convictions
\nD. Their influence in making decisions for the organization
Answer: C
Question: You observe that a company’s current ratio is dramatically increasing. This may indicate fraud in that
Answer Choices:
A. Contingent liabilities are not recorded
\nB. Accounts payable is understated
\nC. Expenses have been inappropriately capitalized as assets
\nD. Fixed assets are overstated
Answer: B
Question: Frauds are more likely to occur in:
Answer Choices:
A. large, historically profitable companies
\nB. Companies with an active board of directors
\nC. Smaller companies where one or two individuals have almost all control in decision making
\nD. any company, as the probability of a fraud does not change with the size of a company
Answer: C
Question: Horizontal analysis is a method that
Answer Choices:
A. Examines financial statement numbers from period to period
\nB. Examines percent changes in account balances from period to period
\nC. Examines transactions from period to period
\nD. None of the above
Answer: B
\n
\nQuestions 21-30:
Question: Which of the following factors does NOT make fraud more difficult to detect?
Answer Choices:
A. Collusion with outsiders
\nB. Forgery, which GAAS auditors are not routinely trained to detect
\nC. Off-book frauds in which no records on the company’s books are fraudulent
\nD. All of the above make fraud more difficult to detect
Answer: D
Question: Proactively searching for analytical symptoms related to financial statement fraud means that we are looking for accounts that appear
Answer Choices:
A. Too low
\nB. Too high
\nC. Unusual
\nD. Any of the above
Answer: D
Question: Recognizing something as revenue instead of as a liability has a positive effect on the reported financial statements because
Answer Choices:
A. It understates liabilities
\nB. It overstates revenues
\nC. It overstates net income
\nD. It overstates assets
\nE. A, B, and C
\nF. All of the above
Answer: F
\n
\nQuestions 31-40:
Question: Management fraud is usually committed on behalf of the organization rather than against it. Which of the following would NOT be a motivation of fraud on behalf of an organization?
Answer Choices:
A. The CEO wanting a new car
\nB. A highly competitive industry
\nC. A high-pressure industry
\nD. Having to restructure debt covenants that can’t be met
Answer: A
Question: Each of the following assets is correctly linked with how it can be overstated EXCEPT
Answer Choices:
A. Inventory can be overstated by improperly capitalizing these assets
\nB. Marketable securities can be overstated because it is difficult to assign an accurate value to the securities
\nC. Fixed assets can be overstated by leaving expired assets on the books
\nD. Assets can be inflated by having the wrong entity act as the asset’s purchases
Answer: A