Question 1

Capitalized costs that should be expensed ___________.

Accepted Answer

A)  are often easy to detect. 
B)  usually occur in one large transaction. 
C)  overstate net income by the same amount of the capitalized costs. 
D)  are usually written off shortly after the transaction takes place. 
A)  are often easy to detect. 
B)  usually occur in one large transaction. 
C)  overstate net income by the same amount of the capitalized costs. 
D)  are usually written off shortly after the transaction takes place. C

Question 2

According to the Statement of Financial Accounting Standards No. 5, "Accounting Contingencies," if the likelihood of a loss or payment is "remote," a contingent liability should be disclosed:

Accepted Answer

A)  On the balance sheet 
B)  On the income statement 
C)  In the footnotes to the financial statements 
D)  None of the above 
A)  On the balance sheet 
B)  On the income statement 
C)  In the footnotes to the financial statements 
D)  None of the above D

Question 3

Fraudsters use all of the following methods to conceal frauds from auditors except:

Accepted Answer

A)  Collusion with people outside the company 
B)  Collusion with people inside the company 
C)  Forgery 
D)  Keeping the fraud off the books 
E)  All of the above 
A)  Collusion with people outside the company 
B)  Collusion with people inside the company 
C)  Forgery 
D)  Keeping the fraud off the books 
E)  All of the above E

Question 4

With liability fraud, which is most likely to occur?

Accepted Answer

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

Question 5

Regarding deferred revenue liabilities, revenues can generally be recognized when a company:

Accepted Answer

A)  Receives an order for a product 
B)  Produces a product that corresponds with a received order 
C)  Ships a product to a customer 
D)  Receives confirmation that a product has been received by a customer 
A)  Receives an order for a product 
B)  Produces a product that corresponds with a received order 
C)  Ships a product to a customer 
D)  Receives confirmation that a product has been received by a customer

Question 6

All of the following are analyses that can be performed to search for analytical fraud symptoms except:

Accepted Answer

A)  Comparing financial statement balances with corresponding pro forma balances 
B)  Comparing changes and trends in financial statement relationships 
C)  Comparing financial statement balances with nonfinancial information 
D)  Comparing financial statement balances with those of similar companies 
E)  All of the above are types of analysis used to search for analytical fraud symptoms 
A)  Comparing financial statement balances with corresponding pro forma balances 
B)  Comparing changes and trends in financial statement relationships 
C)  Comparing financial statement balances with nonfinancial information 
D)  Comparing financial statement balances with those of similar companies 
E)  All of the above are types of analysis used to search for analytical fraud symptoms

Question 7

Which of the following assets is probably most difficult to overstate under normal audit procedures?

Accepted Answer

A)  Fixed Assets 
B)  Marketable securities 
C)  Cash 
D)  Accounts Receivables 
A)  Fixed Assets 
B)  Marketable securities 
C)  Cash 
D)  Accounts Receivables

Question 8

Which of the following is not a method used to understate liabilities?

Accepted Answer

A)  understate accounts payable 
B)  understate accrued liabilities 
C)  recognize earned revenue as unearned revenue 
D)  under record future obligations 
A)  understate accounts payable 
B)  understate accrued liabilities 
C)  recognize earned revenue as unearned revenue 
D)  under record future obligations

Question 9

What is the first step for identifying frauds involving liabilities?

Accepted Answer

A)  Identify transactions that involve liabilities that can be understated 
B)  Review asset listings 
C)  Analyze the trend in gross margin for the company. 
D)  All of the Above 
A)  Identify transactions that involve liabilities that can be understated 
B)  Review asset listings 
C)  Analyze the trend in gross margin for the company. 
D)  All of the Above

Question 10

Which type of financial statement fraud almost never causes analytical symptoms and only sometimes creates documentary symptoms?

Accepted Answer

A)  Inventory Fraud 
B)  Revenue Fraud 
C)  Liability Fraud 
D)  Disclosure Fraud 
A)  Inventory Fraud 
B)  Revenue Fraud 
C)  Liability Fraud 
D)  Disclosure Fraud

Question 11

In dealing with capitalized costs, you might find deferred charges of interest on the balance sheet. What should you do?

Accepted Answer

A)  Assume they are accurately capitalized 
B)  Suspect a fraud may have occurred but try to prove innocence 
C)  Look for ways the company could have accidentally deferred the charges 
D)  Deferred interest charges are perfectly normal on the balance sheet 
A)  Assume they are accurately capitalized 
B)  Suspect a fraud may have occurred but try to prove innocence 
C)  Look for ways the company could have accidentally deferred the charges 
D)  Deferred interest charges are perfectly normal on the balance sheet

Question 12

The most difficult account for management to intentionally misstate is:

Accepted Answer

A)  Income Taxes Payable 
B)  Cash 
C)  Securities 
D)  Prepaid expenses 
A)  Income Taxes Payable 
B)  Cash 
C)  Securities 
D)  Prepaid expenses

Question 13

When analyzing the balance sheet for under recorded accounts payable which of the following ratios is applicable?

Accepted Answer

A)  Long-term debt/Stockholder's Equity 
B)  Warranty Expense/Sales 
C)  Current Ratio 
D)  Various accrual/Related expenses 
A)  Long-term debt/Stockholder's Equity 
B)  Warranty Expense/Sales 
C)  Current Ratio 
D)  Various accrual/Related expenses

Question 14

Which of the following is not used to track changes in fixed asset account balances?

Accepted Answer

A)  Sequential acid ratio testing 
B)  Horizontal analysis 
C)  Cash flow statement analysis 
D)  Period-to-period comparisons of account balances 
A)  Sequential acid ratio testing 
B)  Horizontal analysis 
C)  Cash flow statement analysis 
D)  Period-to-period comparisons of account balances

Question 15

Which of the following is most helpful for detecting liability frauds?

Accepted Answer

A)  Documents with banks and financial institutions 
B)  Interviews with shipping personnel 
C)  Lifestyle changes of upper management 
D)  Ratios that suggest liabilities are overstated 
A)  Documents with banks and financial institutions 
B)  Interviews with shipping personnel 
C)  Lifestyle changes of upper management 
D)  Ratios that suggest liabilities are overstated

Question 16

Which of the following is NOT a fraud scheme involving an asset account?

Accepted Answer

A)  Inappropriately capitalizing marketing costs 
B)  Using market values rather than book values to record assets 
C)  Not recording depreciation 
D)  All of the above are schemes involving asset accounts 
A)  Inappropriately capitalizing marketing costs 
B)  Using market values rather than book values to record assets 
C)  Not recording depreciation 
D)  All of the above are schemes involving asset accounts

Question 17

Which is not a symptom of liability fraud?

Accepted Answer

A)  Decrease in warranty expense estimate 
B)  Accounts payable grow faster than cost of goods sold & inventory 
C)  Unusual increase in current ratio 
D)  Decrease in accruals & unearned revenue from prior periods 
A)  Decrease in warranty expense estimate 
B)  Accounts payable grow faster than cost of goods sold & inventory 
C)  Unusual increase in current ratio 
D)  Decrease in accruals & unearned revenue from prior periods

Question 18

All of the following are examples of asset fraud except:

Accepted Answer

A)  Using market values instead of book values to record assets 
B)  Not recording depreciation 
C)  Purchases and sales of assets using "straw buyers" 
D)  Underreporting accounts payable 
A)  Using market values instead of book values to record assets 
B)  Not recording depreciation 
C)  Purchases and sales of assets using "straw buyers" 
D)  Underreporting accounts payable

Question 19

Red flags of financial statement fraud include all but which of the following

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 are reasonably possible and have the potential to create a loss for the company 
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 are reasonably possible and have the potential to create a loss for the company

Question 20

Which of the following frauds is considered the most difficult to find, usually requiring a tip?

Accepted Answer

A)  asset overstatement fraud 
B)  employee fraud 
C)  vendor fraud 
D)  disclosure fraud 
A)  asset overstatement fraud 
B)  employee fraud 
C)  vendor fraud 
D)  disclosure fraud

Capitalized costs that should be expensed ___________.

According to the Statement of Financial Accounting Standards No. 5, "Accounting Contingencies," if the likelihood of a loss or payment is "remote," a contingent liability should be disclosed:

Fraudsters use all of the following methods to conceal frauds from auditors except:

With liability fraud, which is most likely to occur?

Regarding deferred revenue liabilities, revenues can generally be recognized when a company:

All of the following are analyses that can be performed to search for analytical fraud symptoms except:

Which of the following assets is probably most difficult to overstate under normal audit procedures?

Which of the following is not a method used to understate liabilities?

What is the first step for identifying frauds involving liabilities?

Which type of financial statement fraud almost never causes analytical symptoms and only sometimes creates documentary symptoms?

In dealing with capitalized costs, you might find deferred charges of interest on the balance sheet. What should you do?

The most difficult account for management to intentionally misstate is:

When analyzing the balance sheet for under recorded accounts payable which of the following ratios is applicable?

Which of the following is not used to track changes in fixed asset account balances?

Which of the following is most helpful for detecting liability frauds?

Which of the following is NOT a fraud scheme involving an asset account?

Which is not a symptom of liability fraud?

All of the following are examples of asset fraud except:

Red flags of financial statement fraud include all but which of the following

Which of the following frauds is considered the most difficult to find, usually requiring a tip?

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

Capitalized costs that should be expensed ___________.

According to the Statement of Financial Accounting Standards No. 5, "Accounting Contingencies," if the likelihood of a loss or payment is "remote," a contingent liability should be disclosed:

Fraudsters use all of the following methods to conceal frauds from auditors except:

With liability fraud, which is most likely to occur?

Regarding deferred revenue liabilities, revenues can generally be recognized when a company:

All of the following are analyses that can be performed to search for analytical fraud symptoms except:

Which of the following assets is probably most difficult to overstate under normal audit procedures?

Which of the following is not a method used to understate liabilities?

What is the first step for identifying frauds involving liabilities?

Which type of financial statement fraud almost never causes analytical symptoms and only sometimes creates documentary symptoms?

In dealing with capitalized costs, you might find deferred charges of interest on the balance sheet. What should you do?

The most difficult account for management to intentionally misstate is:

When analyzing the balance sheet for under recorded accounts payable which of the following ratios is applicable?

Which of the following is not used to track changes in fixed asset account balances?

Which of the following is most helpful for detecting liability frauds?

Which of the following is NOT a fraud scheme involving an asset account?

Which is not a symptom of liability fraud?

All of the following are examples of asset fraud except:

Red flags of financial statement fraud include all but which of the following

Which of the following frauds is considered the most difficult to find, usually requiring a tip?

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