Question: All of the following adjustments can be used to understate accounts payable EXCEPT:
Answer Choices:
A. Recording purchases after year end
\nB. Overstating purchase discounts
\nC. Understating purchase returns
\nD. Omitting purchases
\nE. None of the above
Answer: C
Question: No mention of the contingent liability needs to be made in the financial statements, if the probability of payment is
Answer Choices:
A. remote
\nB. probable
\nC. reasonable possible
\nD. not plausible
Answer: A
Question: Which of the following is least likely to be considered a financial reporting fraud symptom or red flag?
Answer Choices:
A. Grey directors
\nB. Family relationships between directors or officers
\nC. Large increases in accounts receivable with no increase in sales
\nD. Size of the firm
Answer: D
Question: When looking for financial statement fraud, auditors should look for indicators of fraud by
Answer Choices:
A. Examining the financial statements
\nB. Evaluating changes in financial statements
\nC. Examining relationships the company has with other parties
\nD. Examining operating characteristics of the company
\nE. All of the above
\nF. None of the above
Answer: E
Question: Which type of fraud will not have any analytical symptoms?
Answer Choices:
A. Inventory Fraud
\nB. Revenue Fraud
\nC. Liability Fraud
\nD. Disclosure Fraud
Answer: D
Question: Which of the following is usually the single most effective tool in preventing and detecting fraud?
Answer Choices:
A. Monitoring employees
\nB. Having a good system of internal controls
\nC. Having a well-written company code of ethics
\nD. Strict hiring procedures
Answer: B
Question: Identify an example of a perceived pressure that can motivate financial statement fraud.
Answer Choices:
A. The ability to obfuscate the fraud behind complex transactions
\nB. Failure to meet Wall Street’s earnings expectations
\nC. Rationalizing that all companies use aggressive accounting practices
\nD. A weak board of directors
Answer: B
Question: Which of the following contributes to creating a corporate culture of honesty and openness?
Answer Choices:
A. Hiring honest people
\nB. Performing criminal background checks
\nC. Not having an open-door policy
\nD. Having a well-understood and respected code of ethics
\nE. Both A and D
Answer: E
Question: Lifestyle symptoms are most effective in detecting
Answer Choices:
A. Revenue-related financial statement fraud
\nB. Inventory-related financial statement fraud
\nC. Employee fraud
\nD. Accounts payable financial statement fraud
Answer: C
Question: Inadequate disclosure fraud usually involves
Answer Choices:
A. Statements in the footnotes that are wrong but do not impact the financial statement
\nB. Disclosures that should have been made in the footnotes but were not
\nC. Both A and B
\nD. Neither A nor B
Answer: C
Question: Reported revenue and sales account balances that appear too high are examples of
Answer Choices:
A. Documentary symptoms
\nB. Lifestyle symptoms
\nC. Verbal symptoms
\nD. Analytical symptoms
Answer: D
Question: Financial statement fraud is usually committed by
Answer Choices:
A. Executives
\nB. Managers
\nC. Stockholders
\nD. Outsiders
\nE. Both A and B
Answer: E
Question: Which of the following is the typical fraud model that describes most firms?
Answer Choices:
A. Fraud incident, investigation, action, resolution
\nB. Fraud incident, assess risk, investigation, reporting
\nC. Assess risk, fraud incident, investigation, resolution
\nD. Assess risk, investigation, implement a fraud program, reporting
Answer: C
Question: In the PharMor fraud case, several different methods were used for manipulating the financial statements. These included all of the following EXCEPT
Answer Choices:
A. Funneling losses into unaudited subsidiaries
\nB. Overstating inventory
\nC. Recognizing revenue that should have been deferred
\nD. Manipulating accounts
Answer: C
Question: In liability fraud, liabilities are most often
Answer Choices:
A. Understated
\nB. Overstated
\nC. Recorded as assets
\nD. Recorded as expenses
Answer: A
Question: A company’s control environment includes
Answer Choices:
A. The tone that management establishes toward what is honest and acceptable behavior
\nB. Corporate hiring practices
\nC. Having an internal audit department
\nD. All of the above
Answer: D
Question: Last-minute revenue adjustments, unsupported balance sheet amounts, and improperly recorded revenues are examples of
Answer Choices:
A. Analytical symptoms
\nB. Documentary symptoms
\nC. Control symptoms
\nD. Perceptional symptoms
Answer: B
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\nQuestions 61-67: